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Which of the following items should be included in the cost of inventories?

a. Conversion costs b. The cost of abnormal wastage of materials and labor c. Selling costs d. The cost of storing finished goods

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Question added by Deleted user
Date Posted: 2013/08/28
Mohammed Muqhtadar Amjad Khan
by Mohammed Muqhtadar Amjad Khan , Procurement Manager - JV (Saudi Arabia, Egypt, Lebanon) , Al Salem Johnson Controls

Cost of Storing Goods will be considered as Cost of Inventories.

As Conversion Costs & Scrap does not relates to Inventory Carrying Costs!

Ezzidin Ibrahim
by Ezzidin Ibrahim , Financial Controller , Karim Food Industries

a. Conversion costs , which contains the direct labor and manufacturing overhead costs.

Muhammad Faizan ACA Actively Searching for new Opportunities
by Muhammad Faizan ACA Actively Searching for new Opportunities , Financial Operation Analyst / Senior Accountant , Petroleum Development Oman

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.

 

 

 

 

 

Virendra Rathore
by Virendra Rathore , Senior Executive Accounts , Impetus Infotech India Private Limited

As Per AS2...Conversion Cost is included.

Prince Ninan
by Prince Ninan , Audit Executive , Lewis & Pecker

 Conversion costs and storage cost if storage plays a significant part in making the final product eg - wine

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