CFA Level I · CFA Level I Exam · Analysis of Inventories
Under IFRS, which of the following costs is most likely included in the cost of inventories of a manufacturer?
Fixed production overheads allocated on the basis of normal capacity are included in inventory cost under IFRS. They are conversion costs. Selling costs and storage costs after production are expensed as incurred because they do not bring the goods to their present condition and location.
- AStorage costs after production is complete
- BSelling costs of the finished goods
- CFixed production overheads allocated on normal capacityCorrect
Explanation
IAS 2 includes purchase costs, conversion costs (including fixed production overheads allocated based on normal capacity) and other costs to bring inventory to present location and condition. Selling costs and storage after production (unless necessary in the production process) are expensed.
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