CAF-5 · Chapter 9 · Question 2 of 10
Under a marginal costing system, how are fixed production overheads treated in the financial period they are incurred?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) They are treated as a period cost and written off entirely in the Statement of Profit or Loss.
Explanation
In marginal costing, fixed production overheads are not attached to units of production. Instead, the total actual fixed production overhead incurred is treated as a period cost and deducted in full from the total contribution margin.
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