ICANManagement InformationMaterial, Labour and Overhead Costing2020

Under IAS 2 (Inventories), as adopted by the Financial Reporting Council of Nigeria (FRCN), which of the following costs should be EXCLUDED from the cost of inventories of a manufacturing company?

AVariable production overhead allocated on the basis of normal capacity
BFixed production overhead allocated on the basis of normal capacity
CAbnormal amounts of wasted materials and labourCORRECT
DImport duties on raw materials purchased from foreign suppliers
AI
Toaster Teacher
Why the answer is C, and why the others tempt you.
IAS 2 paragraph 16 explicitly excludes abnormal amounts of wasted materials, labour and other production costs from the cost of inventories; these are expensed in the period incurred. Normal fixed and variable production overheads (options A and B) are included, as are import duties on raw materials (option D), which form part of the purchase cost under IAS 2 paragraph 11.
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