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CMA Foundation · Fundamentals of Financial and Cost Accounting · Application of Cost Accounting for Business Decisions

In marginal costing, which of the following is treated as a period cost and therefore charged in full to the profit and loss statement of the period in which it is incurred?

Fixed manufacturing overhead is the period cost in marginal costing. It is charged in full against contribution in the period incurred and is not included in the value of stock, because only variable costs are treated as product costs.

  1. ADirect labour cost of units produced
  2. BFixed manufacturing overheadCorrect
  3. CVariable production overhead
  4. DDirect material cost of units in closing stock

Explanation

Under marginal costing only variable costs are absorbed into product cost. Fixed manufacturing overhead is written off wholly against contribution in the period. Variable production overhead and direct labour are product costs and are carried in stock if unsold.

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