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CMA Intermediate · Management Accounting · Marginal Costing (Management Accounting)

Under marginal costing, which item is treated as a period cost and charged in full to the Profit and Loss account of the period in which it is incurred?

Fixed factory overhead is the period cost. Marginal costing values stock only at variable cost, so direct materials, direct labour and variable overhead go into stock, while fixed overhead is charged entirely to the period's profit and loss.

  1. ADirect labour
  2. BFixed factory overheadCorrect
  3. CVariable factory overhead
  4. DDirect materials

Explanation

In marginal costing only variable costs are product costs and are included in stock valuation. Fixed costs, including fixed factory overhead, are period costs written off in the period. Direct materials, direct labour and variable overhead are inventoriable.

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