Under marginal costing, what is used to value each unit of inventory?

Under marginal costing, what is used to value each unit of inventory?

• A. The full product cost including fixed overhead
• B. Selling price per unit
• C. The variable production cost required to make each unit
• D. Marketing cost per unit

Answer: (C)

Under marginal costing, inventory is valued at the variable production cost per unit. This includes direct materials, direct labour, and variable overhead allocated to each unit. Fixed production overhead is treated as a period cost and is expensed in the period, not included in inventory. Marketing or other selling costs are not part of the production cost and are also treated as period costs. So the value per unit is the variable production cost required to make that unit.

Under marginal costing, inventory is valued at the variable production cost per unit. This includes direct materials, direct labour, and variable overhead allocated to each unit. Fixed production overhead is treated as a period cost and is expensed in the period, not included in inventory. Marketing or other selling costs are not part of the production cost and are also treated as period costs. So the value per unit is the variable production cost required to make that unit.