Question
According to AS-2, which of the following costs should be included in valuing the inventories of a manufacturing company? (A) Freight and insurance (B) Carriage outwards (C) Depreciation of factory plant (D) General administrative overheads Choose the most appropriate answer from the options given below:
The correct answer is
A and C only
Inventory cost includes freight inward as a purchase cost and an appropriate allocation of factory depreciation as conversion overhead. Selling/distribution costs and general administration that do not bring inventory to its present location and condition are excluded. Thus A and C are correct.
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