CMA Intermediate · Cost Accounting · Marginal Costing
Under marginal costing, which of the following 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 manufacturing overhead is the period cost under marginal costing. It is written off fully against the contribution of the period in which it is incurred, while direct material, direct labour and variable overhead form product cost and are carried in stock valuation.
- ADirect labour cost of units produced
- BFixed manufacturing overheadCorrect
- CVariable manufacturing overhead of closing stock
- DDirect material cost of closing stock
Explanation
In marginal costing only variable costs are charged to the product and carried in inventory. Fixed manufacturing overhead is treated as a period cost and written off in the period. Direct labour, direct materials and variable overhead are product costs and are included in closing stock valuation.
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