Under marginal costing, which cost is generally excluded from the inventory valuation of finished goods?
Correct answer: D. Fixed production overhead
- A. Direct material cost
- B. Direct labour cost
- C. Variable production overhead
- D. Fixed production overhead
Explanation
Marginal costing values inventory using variable production costs and treats fixed production overhead as a period cost. Absorption costing includes an allocated share of fixed production overhead in inventory.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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