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are variable sales overheads considered a production or non production cost??
i think the answer would be production cost since sales o/h are not directly associated to the manufacture of the product.so would they be included when we calculate the overall production cost during marginal costing ?
Sales costs are non-production costs because they are not costs of manufacturing the product.
With marginal costing, the contribution is the sales less all variable costs, but sales variables costs are still not production costs (and are not therefore included in the valuation of inventories).
All of this is dealt with in my free lectures on marginal and absorption costing. The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.
thank you Mr John but the problem im facing is in one of the illustrations in my BPP textbook , while calculating through marginal costing in the book they have included the per unit value of variable sales overhead along with the production o/h
They will have done in arriving at the contribution (as I wrote in my previous reply).
The contribution is the sales less all variable costs (both production and non-production).However sales costs are non-production costs (which is what you were originally asking), and although they are relevant in arriving at the contribution, they are not relevant in valuing the inventory.
Again, I suggest that you watch my free lectures on absorption and marginal costing.
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