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hello sir
6.2 Which of the following costs may be included when arriving at the cost of finished goods inventory for
inclusion in the financial statements of a manufacturing company?
1 Carriage inwards
2 Carriage outwards
3 Depreciation of factory plant
4 Finished goods storage costs
5 Factory supervisors’ wages
A 1 and 5 only
B 2, 4 and 5 only
C 1, 3 and 5 only
D 1, 2, 3 and 4 onlyanswer is C. why we include deprecetion of factory to the cost of goods? Deprecetion is an expense and we must show it in our SOPL.
The cost of goods sold is the total of all costs of manufacturing the goods, which includes the deprecation of the machines.
Of course it is shown in the SOPL, the first part of the SOPL is subtracting the cost of goods sold from the sales!!!
I really do suggest that you watch my free lectures on inventory because I explain this very point in the lectures.
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