Marginal Costing Principles

Steps:

• Define marginal costing as a technique where only variable costs are charged to products, treating fixed costs as period expenses.
• Evaluate statements: Identify which align with variable costing for inventory and contribution focus.
• Check statement 2: Confirms separation of costs for decision-making.
• Check statement 4: Verifies inventory valuation at variable cost only.

Why D is correct:

• Marginal costing values inventory at variable production cost (per CIMA definition), excluding fixed overheads, and emphasizes contribution (sales - variable costs).

Why the others are wrong:

• A: Statement 1 incorrectly includes fixed costs in some contexts; 3 misapplies to long-term pricing.
• B: Statement 1 overstates exclusion; 4 is accurate but paired wrongly.
• C: Statement 3 confuses with absorption costing benefits.

Not enough information on exact statements 1-4 to fully verify.

Final answer: D