Q9. Cost of Inventory
How is the cost of inventory determined?
Inventory cost includes all expenditures necessary to make the inventory ready for intended use.
(1) Entity 9A purchased 200 units of raw materials at $5 per unit.
(2) Transportation cost of moving raw materials to the factory warehouse was $100.
What is the cost of raw materials to be recorded at the time of recognition?
1. Cost of purchase = 300 units x $5 = $1,500
2. Transportation cost = $200
3. Cost of raw materials
= Cost of purchase + Transportation cost
= $1,500 + $200 = $1,700