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CA Foundation · Accounting · Inventories

Which of the following items is most appropriately costed under AS 2 using the specific identification of individual costs, rather than FIFO or weighted average?

Items segregated for a specific project, such as a custom-built machine for one customer, are costed by specific identification. AS 2 requires this for non-interchangeable items and project-specific goods, whereas interchangeable items use FIFO or weighted average.

  1. AIdentical bags of cement held in a warehouse
  2. BItems segregated for a specific project, such as a custom-built machine ordered by one customerCorrect
  3. CInterchangeable units of a standard raw material stored in a common bin
  4. DBulk quantities of fungible grain in a silo

Explanation

AS 2 requires specific identification for items that are not ordinarily interchangeable and for goods or services produced and segregated for specific projects. Interchangeable, fungible items in common storage use FIFO or weighted average instead.

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