Register now or log in to join your professional community.
a. Conversion costs b. The cost of abnormal wastage of materials and labor c. Selling costs d. The cost of storing finished goods
Cost of Storing Goods will be considered as Cost of Inventories.
As Conversion Costs & Scrap does not relates to Inventory Carrying Costs!
a. Conversion costs , which contains the direct labor and manufacturing overhead costs.
a, conversion cost
Cost of inventories
As per para10 of IAS2 "The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
As per para16 of IAS2 "Examples of costs excluded from the cost of inventories and recognised as expenses in the period in which they are incurred are:
(a) abnormal amounts of wasted materials, labour or other production costs;
(b) storage costs, unless those costs are necessary in the production process before a further production stage;
(c) administrative overheads that do not contribute to bringing inventories to their present location and condition; and
(d) selling costs.
Conclusion. Only a is relevant for inclusion in cost of inventory.
Hope you understand.
As Per AS2...Conversion Cost is included.
