Question

Item 1Item 1 A company incurred the following costs related to the production of inventory in the current year: Cost of materials $ 100,000 Cost of direct labor 60,000 Allocation of variable overhead costs 30,000 Allocation of fixed overhead costs (based on normal production levels) 25,000 Storage costs (after production, prior to sale) 2,000 Selling costs 8,000 The cost of materials included abnormal waste of $10,000. What is the cost of inventory in the current year?

Answer 1

Answer:

$ 215,000

Explanation:

Cost Inventory should include only the expenses related to normal production. Therefore, the following ones should not be considered within the cost to form the Stocks ( Asset ) :

 Storage costs    --->   Logistics  

 Selling costs    --->   Sales

 Abnormal waste    --->   Production ( related to manufactoring but it is not part of the cost of the inventory, it is expense of the period  )

 

   Inventory Costs:

                                                                     $

Cost of materials                                       100,000

Cost of direct labor                                  60,000

Allocation of variable overhead costs   30,000

Allocation of fixed overhead costs          25,000

Total:                                                               215,000