A loss caused by abnormal wastage of materials during production is generally treated as:
Correct answer: C. An expense of the current period
- A. A direct addition to inventory cost
- B. A deferred production expense
- C. An expense of the current period
- D. A reduction from trade receivables
Explanation
Abnormal wastage is not a normal cost of bringing inventory to its present condition. It is recognized as an expense in the period in which the loss occurs.
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About Inventory Valuation
Inventory valuation determines the cost of unsold goods and its effect on cost of sales and profit. The work covers inventory counts, included costs, FIFO and weighted-average costing, and the rule that inventory is reported at the lower of cost and net realisable value, not simply at its expected selling price.
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More Inventory Valuation questions
Under IAS 2, how are fixed production overheads normally allocated to inventory?
Which item is normally included in the cost of inventory under IAS 2?
Specific identification is most appropriate for inventory consisting of:
When inventory is written down to net realisable value, the resulting loss is generally recognized as:
If the net realisable value of inventory later increases, an earlier write-down under IAS 2 may be:
Which statement best describes the weighted average cost method when identical inventory units are purchased at different prices?