In marginal costing, which of the following costs is treated as a period cost?

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Question: In marginal costing, which of the following costs is treated as a period cost?

Options:

Correct Answer: Fixed manufacturing overhead

Solution:

In marginal costing, fixed manufacturing overhead is treated as a period cost and is expensed in the period incurred.

In marginal costing, which of the following costs is treated as a period cost?

In marginal costing, which of the following costs is treated as a period cost?

Step 1: Understand what marginal costing is. It is a costing method that only considers variable costs for product costing.
Step 2: Identify the types of costs involved in marginal costing. These include variable costs (like direct materials and direct labor) and fixed costs (like fixed manufacturing overhead).
Step 3: Learn the difference between product costs and period costs. Product costs are costs that are directly tied to the production of goods, while period costs are costs that are expensed in the period they are incurred.
Step 4: Recognize that in marginal costing, fixed manufacturing overhead is not included in the product cost. Instead, it is treated as a period cost.
Step 5: Conclude that fixed manufacturing overhead is expensed in the period it occurs, making it a period cost in marginal costing.

Marginal Costing – A costing method that only considers variable costs for product costing, treating fixed costs as period costs.
Period Costs – Costs that are expensed in the period they are incurred, rather than being included in product costs.
Fixed Manufacturing Overhead – Costs that do not vary with production levels and are treated as period costs in marginal costing.