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

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akiran007

Answer:

$ 205,000

Explanation:

Cost of inventory is calculated using the cost of goods sold less abnormal waste

Cost of materials  $100,000

Add Cost of direct labor  60,000

Add Variable overhead costs  30,000

Add Fixed overhead costs  25,000

Cost Of Goods Sold = $ 215000

Less Abnormal Waste= $ 10,000

Cost Of Inventory = $ 205,000

Cost of Inventory includes the raw materials , direct labor, factory overheads.The abnormal waste is excluded  under the GAAP or IFRS from the cost of sales.

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