GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Direct material only
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Direct Labour + Direct Expenses
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Direct Material + Direct Expenses
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All costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition
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Detailed explanation-1: -The cost of inventories includes all costs of purchase, costs of conversion (direct labour and production overhead) and other costs incurred in bringing the inventories to their present location and condition.
Detailed explanation-2: -Cost of inventories – all costs incurred in bringing the inventories to their present location and condition, including the costs of purchase and conversion.
Detailed explanation-3: -The costs of conversion of inventories include costs directly related to the units of production, such as direct labor. They also include a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods.
Detailed explanation-4: -Both US GAAP and IFRS stipulate that the costs that are to be included in inventories are “all costs of purchase, costs of conversion, and other costs incurred in bringing the inventories to their present location and condition.”