In marginal costing, fixed costs are charged to the period in which they occur and are not carried forward to the next period.

• A. True.
• B. False.
• C. Only for variable overheads.
• D. Are allocated to individual products.

Answer: (A)

In marginal costing, fixed costs are treated as period costs, not as part of the cost of units. This means they are charged to the income statement in the period in which they occur, rather than being allocated to produced units or inventoried. Because fixed overheads don’t vary with production in the short term, their impact is recognized in the period’s profit, and any stock on hand is valued using only variable costs. So the fixed costs do not flow into the cost of inventory or carry forward to future periods. That’s why the statement is true.

For contrast, fixed costs are not allocated to individual products under marginal costing (that happens in absorption costing), and the idea that fixed costs apply only to certain overheads or are tied to product-by-product allocation would not fit the marginal costing approach.