Costing & Marketing Management MCQs With Answer

Introduction: This set of MCQs on Costing & Marketing Management is designed specifically for M.Pharm students studying MIP 204T – Entrepreneurship Management. It covers core costing concepts such as fixed and variable costs, break-even analysis, activity-based costing, pricing techniques, and investment appraisal methods, along with pharmaceutical marketing topics including product life-cycle, segmentation, distribution channels, promotion constraints for prescription drugs, tender pricing, and pharmacoeconomics. Questions are crafted to test applied understanding relevant to launching and managing pharmaceutical products or startups. Use these MCQs to assess readiness for exams and to build practical decision-making skills in pharma entrepreneurship and managerial finance.

Q1. Which of the following best describes a fixed cost in pharmaceutical manufacturing?

• Cost that varies with batch size and production volume
• Cost that remains constant in total over a relevant range of output
• Cost directly traceable to a single product ingredient
• Cost incurred only when producing the first batch

Correct Answer: Cost that remains constant in total over a relevant range of output

Q2. The break-even point in units is calculated by which formula?

• Fixed Costs × Contribution per unit
• Total Costs ÷ Total Revenue
• Fixed Costs ÷ Contribution per unit
• Variable Costs ÷ Selling Price

Correct Answer: Fixed Costs ÷ Contribution per unit

Q3. In cost-volume-profit analysis, “contribution margin” means:

• The selling price per unit minus fixed cost per unit
• Total revenue minus total cost
• Selling price per unit minus variable cost per unit
• Fixed costs divided by number of units produced

Correct Answer: Selling price per unit minus variable cost per unit

Q4. Activity-Based Costing (ABC) is particularly useful in pharmaceutical companies because it:

• Simplifies accounting by using a single overhead rate
• Allocates overhead costs based solely on machine hours
• Assigns overheads to products based on actual activities and drivers
• Eliminates the need to track indirect costs

Correct Answer: Assigns overheads to products based on actual activities and drivers

Q5. Which statement distinguishes marginal costing from absorption costing?

• Marginal costing absorbs all fixed overhead into unit cost
• Absorption costing treats fixed manufacturing overhead as a period cost
• Marginal costing treats fixed manufacturing overhead as period cost
• Both methods always give identical profit figures regardless of inventory change

Correct Answer: Marginal costing treats fixed manufacturing overhead as period cost

Q6. A penetration pricing strategy is best described as:

• Setting a high initial price to skim surplus demand
• Setting a low initial price to gain market share rapidly
• Charging different prices to different customers for the same product
• Setting price equal to marginal cost for each unit

Correct Answer: Setting a low initial price to gain market share rapidly

Q7. Price elasticity of demand refers to:

• Change in demand when product quality changes
• Responsiveness of quantity demanded to change in price
• Change in price when production costs fluctuate
• Difference between list price and discounted price

Correct Answer: Responsiveness of quantity demanded to change in price

Q8. During the introduction stage of the pharmaceutical product life cycle, the primary marketing objective is:

• Defend market share against competitors
• Accelerate repeat purchases and brand loyalty
• Create awareness and stimulate initial trial among prescribers
• Harvest profits and reduce marketing support

Correct Answer: Create awareness and stimulate initial trial among prescribers

Q9. Which distribution channel is commonly used by pharmaceutical manufacturers to reach hospitals and pharmacies efficiently?

• Direct-to-consumer e-commerce only
• Third-party distributors and wholesalers
• Manufacturer-owned exclusive retail chain only
• Door-to-door sales to patients

Correct Answer: Third-party distributors and wholesalers

Q10. For prescription medicines, the most appropriate primary promotional target in ethical pharmaceutical marketing is:

• The general public through mass advertising
• Healthcare professionals such as physicians and pharmacists
• School health programs and children
• Retail shoppers via in-store displays

Correct Answer: Healthcare professionals such as physicians and pharmacists

Q11. Market segmentation in pharmaceuticals commonly uses which combination of bases?

• Geographic and product ingredient only
• Demographic, psychographic and behavioral (prescribing behavior)
• Packaging color and font size
• Production process and machine capacity

Correct Answer: Demographic, psychographic and behavioral (prescribing behavior)

Q12. In SWOT analysis for a pharmaceutical startup, “Threats” typically refer to:

• Internal weaknesses such as poor cash flow
• External factors like competitor launches or regulatory changes
• Company strengths like proprietary formulation
• Opportunities to enter new geographic markets

Correct Answer: External factors like competitor launches or regulatory changes

Q13. Which pricing method sets a product price by adding a percentage markup to its unit cost?

• Value-based pricing
• Cost-plus pricing
• Penetration pricing
• Dynamic pricing

Correct Answer: Cost-plus pricing

Q14. Which financial metric explicitly accounts for the time value of money when evaluating an investment in a new drug production line?

• Payback period
• Accounting rate of return (ARR)
• Net present value (NPV)
• Gross profit margin

Correct Answer: Net present value (NPV)

Q15. In tender-based procurement for public hospitals, which pricing strategy is often essential to win contracts?

• Premium pricing targeting niche prescribers
• Lowest responsive bid or competitive tender pricing
• Price skimming to maximize short-term profits
• Psychological pricing (e.g., 9.99)

Correct Answer: Lowest responsive bid or competitive tender pricing

Q16. Which approach to cost allocation reduces distortion when products consume overheads unevenly in a multi-product pharmaceutical plant?

• Traditional single-volume basis allocation
• Arbitrary percentage allocation to all products
• Activity-based costing using multiple cost drivers
• Assigning all overhead to the highest-priced product

Correct Answer: Activity-based costing using multiple cost drivers

Q17. “Contribution margin ratio” is computed as:

• Variable cost per unit ÷ Selling price per unit
• Contribution per unit ÷ Selling price per unit
• Fixed cost ÷ Selling price
• Gross margin ÷ Fixed costs

Correct Answer: Contribution per unit ÷ Selling price per unit

Q18. For service-oriented pharmaceutical offerings (e.g., clinical services, patient support), the extended marketing mix includes which additional “Ps” beyond Product, Price, Place, Promotion?

• People, Process, Physical evidence
• Packaging, Profit, Performance
• Policy, Patents, Production
• Positioning, Perception, Procurement

Correct Answer: People, Process, Physical evidence

Q19. Pharmacoeconomics primarily helps decision makers by:

• Determining the chemical stability of an API
• Comparing costs and health outcomes of alternative therapies
• Forecasting foreign exchange rates for import of raw materials
• Setting retail markups for OTC products

Correct Answer: Comparing costs and health outcomes of alternative therapies

Q20. A distributor in the pharmaceutical supply chain typically adds value by:

• Eliminating regulatory requirements for manufacturers
• Providing warehousing, bulk breaking and timely replenishment to pharmacies
• Designing new formulations and clinical trials
• Setting national pricing policy for drugs

Correct Answer: Providing warehousing, bulk breaking and timely replenishment to pharmacies

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