Marginal Costing Statement Evaluation

Steps:

• Recall marginal costing separates variable and fixed costs, focusing on contribution margin.
• Identify correct statements: 1 (contribution covers fixed costs) and 4 (ignores fixed cost absorption) align with principles.
• Eliminate incorrect ones: 2 (over/under absorption issues) and 3 (full costing comparison) do not apply.
• Select option matching correct statements 1 and 4.

Why A is correct:

• Marginal costing emphasizes variable costs only for decisions, per CIMA definition, validating statements 1 and 4.

Why the others are wrong:

• B includes 2, which confuses absorption costing.
• C pairs 2 and 3, both irrelevant to marginal approach.
• D omits 1, a core marginal costing tenet.

Not enough information.

Final answer: A