In marginal costing, fixed costs are treated as:

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Question: In marginal costing, fixed costs are treated as:

Options:

Correct Answer: Period costs

Solution:

In marginal costing, fixed costs are treated as period costs and are charged in full to the profit and loss account.

In marginal costing, fixed costs are treated as:

In marginal costing, fixed costs are treated as:

Step 1: Understand what marginal costing is. It is a costing method that focuses on variable costs and treats fixed costs differently.
Step 2: Know that fixed costs are expenses that do not change with the level of production, like rent or salaries.
Step 3: In marginal costing, fixed costs are not included in the cost of goods sold. Instead, they are treated as period costs.
Step 4: Period costs are expenses that are charged to the profit and loss account for the period they occur, rather than being allocated to products.
Step 5: This means that all fixed costs are fully deducted from revenue in the profit and loss statement for that period.

Marginal Costing – A costing technique that considers only variable costs for decision-making, treating fixed costs as period costs.
Fixed Costs – Costs that do not change with the level of production or sales, treated as expenses in the period incurred.
Profit and Loss Account – A financial statement that summarizes revenues, costs, and expenses to determine net profit or loss over a specific period.