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Help answer this inventory question please

Forums › ACCA Forums › ACCA FR Financial Reporting Forums › Help answer this inventory question please

  • This topic has 0 replies, 1 voice, and was last updated 14 years ago by spatel275.
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  • May 10, 2011 at 12:51 pm #48401
    spatel275
    Member
    • Topics: 2
    • Replies: 0
    • ☆

    Q1. Inventory
    Inventure plc’s inventory as at 31 December 2009 includes a finished product with the following costs to date.
    £ £
    Purchase price 9,000
    Less: 5% trade discount 450
    = 8,550
    Import duty at 10% 855
    Direct labour costs 5,850
    Allocation of fixed production overheads 2,840
    Storage costs since product completed 225
    Advertising costs 317
    Total costs 18,637

    Notes:
    1. All of these costs exclude value added tax (VAT). The company is able to recover any VAT which it is charged by its suppliers but cannot recover import duties
    2. One-third of the materials included above were wasted as the result of an abnormal machine malfunction
    3. Fixed production overheads are allocated to products on the assumption that production is running at normal capacity. In fact, production was unusually low during the period in which this product was made and a further allocation of £820 would be required if fixed overheads were allocated on the basis of actual production.
    4. The advertising were incurred whilst trying to find a buyer for the product. No buyer had been found by 31 December 2009.

    Required:
    Calculate the cost of this product in accordance with the requirements of IAS 2.

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