Which statement about marginal costing is correct?
Answer and explanation
Correct answer: B. Fixed costs are treated as period costs and are written off in the period incurred
- Step 1: Marginal costing values inventory at variable cost.
- Step 2: Fixed costs are therefore charged to the period as incurred.
- Step 3: Contribution = sales − variable costs.
Answer
Fixed costs are treated as period costs and are written off in the period incurred.
Why not the others: This is the treatment under absorption costing. Marginal costing values inventory at variable production cost only. Contribution is sales less variable costs.
Practise more Marginal costing.
Free questions with an explanation for every one, and full timed ACCA Applied Knowledge (BT, MA, FA) mock tests.
More Marginal costing questions
- A product sells for £30 per unit. Variable costs are £18 per unit and fixed costs are £48,000 per month. What is the break-even point in uni…
- Using the same data (selling price £30, variable cost £18, fixed costs £48,000) the company expects to sell 5,000 units. What is the margin…
- A company wants a profit of £30,000 per month. Selling price is £30, variable cost £18 per unit and fixed costs £48,000 per month. How many…
- A company sells two products. Product X has a contribution/sales ratio of 40% and Product Y 25%. Fixed costs are £63,000. Sales are in the r…
- A company makes 3 products with a shortage of machine hours. Product A has a contribution of £30 per unit and uses 5 machine hours; Product…
- A company wants information on how often customers complain about delivery. It reads the complaints log kept by its own customer service dep…