Accounting for AQA: Part 1: Chapter 21

Question 1 Introduction

The marginal cost of making a product is £20 per unit and the absorption cost is £30 per unit. A customer offers to buy 500 units of the product at a price of £25. If this offer is accepted the profits of the business will increase by £2,500.

Question 1

A make or buy decision is a management decision whether to make a product, or supply a service, in-house, or to buy the product or service from an outside supplier.

True

False

Question 2

A make or buy decision is a comparison between the absorption cost of making the product in-house, and the price quoted by the outside supplier.

True

False

Question 3

A supplier to a business has quoted a price of £10 per unit to supply a component used by the business. The marginal cost to the business of manufacturing the component in-house is £12 per unit. If the component is bought in from the supplier, profits will increase.

True

False

Question 4

Where a profitable business has spare capacity it can increase its profits by making additional sales at a selling price below marginal cost.

True

False

Question 5

The marginal cost of making a product is £20 per unit and the absorption cost is £30 per unit. A customer offers to buy 500 units of the product at a price of £25. If this offer is accepted the profits of the business will increase by £2,500.

True

False

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Accounting for AQA: Part 1: Chapter 21

Page 1 of 2 - There are 10 questions in total.

Question 1 Introduction

Question 1

A make or buy decision is a management decision whether to make a product, or supply a service, in-house, or to buy the product or service from an outside supplier.

Question 2

A make or buy decision is a comparison between the absorption cost of making the product in-house, and the price quoted by the outside supplier.

Question 3

A supplier to a business has quoted a price of £10 per unit to supply a component used by the business. The marginal cost to the business of manufacturing the component in-house is £12 per unit. If the component is bought in from the supplier, profits will increase.

Question 4

Where a profitable business has spare capacity it can increase its profits by making additional sales at a selling price below marginal cost.

Question 5

The marginal cost of making a product is £20 per unit and the absorption cost is £30 per unit. A customer offers to buy 500 units of the product at a price of £25. If this offer is accepted the profits of the business will increase by £2,500.

AAT Q2022 Books

Accounting for AQA: Part 1: Chapter 21

Page 1 of 2 - There are 10 questions in total.

Question 1 Introduction

Question 1

A make or buy decision is a management decision whether to make a product, or supply a service, in-house, or to buy the product or service from an outside supplier.

Question 2

A make or buy decision is a comparison between the absorption cost of making the product in-house, and the price quoted by the outside supplier.

Question 3

A supplier to a business has quoted a price of £10 per unit to supply a component used by the business. The marginal cost to the business of manufacturing the component in-house is £12 per unit. If the component is bought in from the supplier, profits will increase.

Question 4

Where a profitable business has spare capacity it can increase its profits by making additional sales at a selling price below marginal cost.

Question 5

The marginal cost of making a product is £20 per unit and the absorption cost is £30 per unit. A customer offers to buy 500 units of the product at a price of £25. If this offer is accepted the profits of the business will increase by £2,500.