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A Level Accounting (9706)•9706/12/O/N/21
Question 26 from 9706/12/O/N/21

Explanation

Marginal cost includes only variable costs incurred for additional units.

Steps:

  • Recall marginal cost definition: change in total cost from producing one more unit.
  • Identify variable costs: those that vary directly with output, like materials and labor.
  • Exclude fixed costs: unchanged by production volume, like rent.
  • Match choices to variable costs: select pair with only variables.

Why B is correct:

  • Option B pairs two variable costs (1: direct materials; 4: direct labor), aligning with marginal cost formula MC = ΔTC / ΔQ, capturing output-driven changes.

Why the others are wrong:

  • A includes fixed cost 2 (e.g., overhead), irrelevant to marginal changes.
  • C pairs fixed cost 2 with variable 3, diluting marginal focus.
  • D includes fixed cost 3 (e.g., utilities base), not purely additional.

Not enough information on exact cost labels, but B fits standard economics.

Final answer: B

Topic: Costs and cost behaviour

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