Inventory

Question 1

Merch Inventory

Answer 1

Costs to purchase
+ shipping
+ Import duties
- rebates

Question 2

Manufacturing Inventory

Answer 2

Raw materials - shipping, import duties etc
+ Direct labour
+ Manufacturing O/H’S

Question 3

Conversion costs

Answer 3

Direct labour + Manufacturing O/H’s

Question 4

Absorption Costing

Answer 4

Allocating O/H costs to inventory.
i.e operating costs: heat, rent, insurance, indirect factory labour

Cost driver used to allocate. I.e # units produced or machine hours

Question 5

Amount of OH allocated to inventory

Answer 5

Period OH costs (estimated) / Cost driver

Any variance due to estimate being incorrect is adjusted through COGS
DR or CR to COGS
DR or CR to Manufacturing OH

Question 6

Cost of an inv item

Answer 6

Direct materials/ item
Direct labour / item
OH rate / item - calc prior

Question 7

Weighted average

Answer 7

Beg inv costs
+ Cost of purchases
= total /
quantity of bgn inventory + quantity of purchases
= per cost amount to be applied to ending inventory

Question 8

Inventory should be recorded at

Answer 8

lower of cost and NRV

NRV = Amount could sell for - selling costs

Question 9

To write inventory down

Answer 9

DR COGS
CR Inventory

when a recent sale is less than the cost recorded on the books

Question 10

Sections of handbook

Answer 10

IAS 2

ASPE 3031

Question 11

Over / under allocated Manuf OH

Answer 11

Over allocated
DR Manufacturing OH
CR COGS/ Inventory - too much was allocated here

Under allocated
DR COGS/ Inventory - too little allocated
CR Manufacturing OH

If portion of inventory has been sold allocate the under/over between COGS and inventory depending on how much is sold