Question

Zane's Vanes is a service that restores old weather vanes. Zane has just spent $125 purchasing a 1920s era weather vane which he expects to restore and sell for $500 once the work is completed. After having spent $125, Zane realizes that he will need to spend an additional $200 on materials to complete the restoration. Alternatively, he can sell the weather vane without restoring it for $200. What is his marginal cost to complete the restoration?

a. $75
b. $125
c. $200
d. $300

Answer 1

C.

Step-by-step explanation:

Marginal cost is the increase or decrease in the total cost of a business will incur by producing one more unit of a product or serving one more customer.

Marginal costing is a technique of costing fully oriented towards managerial decision making and control. Marginal costing being a technique can be used in conjunction with any method of cost ascertainment. It can be use in combination with other techniques such as budgeting and standard costing.

Marginal costing is helpful in determining the profitability of products, departments, processes and cost centers.

In this case, the additional cost to the restore is $200 for the materials.