In marginal costing, are fixed overheads included in product cost?

In marginal costing, are fixed overheads included in product cost?

• A. Yes, they are included
• B. No, they are treated as period costs and deducted in full in the SPL
• C. They are allocated using overhead absorption rates
• D. They are ignored entirely

Answer: (B)

In marginal costing, you separate costs into variable and fixed, and only the variable manufacturing costs are included in the product cost. Fixed overheads are treated as period costs and charged to the profit and loss statement in the period they occur, not absorbed into inventory. This is why fixed overheads are not part of the product cost under marginal costing. The fixed overheads are deducted in full in the P&L, rather than being allocated to units.

In marginal costing, you separate costs into variable and fixed, and only the variable manufacturing costs are included in the product cost. Fixed overheads are treated as period costs and charged to the profit and loss statement in the period they occur, not absorbed into inventory. This is why fixed overheads are not part of the product cost under marginal costing. The fixed overheads are deducted in full in the P&L, rather than being allocated to units.