Which of the following statements about IAS 2 Inventories are correct?1 Production overheads should be included in cost on the basis of a companys actual level of activity in the period.2 In arriving at the net realisable value of inventories, settlement discounts must be deducted from the expected selling price.3 In arriving at the cost of inventories, FIFO, LIFO and weighted average cost formulas are acceptable.4 It is permitted to value finished goods inventories at materials plus labour cost only, without adding production overheads.

COST ACCOUNTING STANDARDS

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

Which of the following statements about IAS 2 Inventories are correct?1 Production overheads should be included in cost on the basis of a company’s actual level of activity in the period.2 In arriving at the net realisable value of inventories, settlement discounts must be deducted from the expected selling price.3 In arriving at the cost of inventories, FIFO, LIFO and weighted average cost formulas are acceptable.4 It is permitted to value finished goods inventories at materials plus labour cost only, without adding production overheads.

A	1 only
B	1 & 2
C	3 & 4
D	None of them

Explanation:

Detailed explanation-1: -Answer:-(A) According to IAS 2 Inventories, average cost and FIFO are both acceptable methods of arriving at the cost of inventories. Ans :-This Statement is Correct.

Detailed explanation-2: -Accounting Standard 2 (AS 2) deals with the accounting treatment of inventories by the business entities. It provides details with regards to the items that comprise inventory and various costs associated with such an inventory.

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