Question

A car dealer acquires a used car for $14,000, with terms FOB shipping point. Compute total inventory costs assigned to the used car if additional costs include $250 for transportation-in. $300 for shipping insurance. $900 for car import duties. $150 for advertising. $1,250 for sales staff salaries. $180 for trimming shrubs.

Answer 1

Answer:

The total inventory cost assigned to the used car would be 15,450 dollars.

Explantion:

As per accounting standards only directly attributable expenses become parts of inventory cost. In others words selling, admin and distribution cost cannot become part of asset and is recognized as an expense in the period in which they are incured.

SO the total inventory cost includes

Car cost = 14000 dollars

Transportation cost = 250 dollars

Shipping insurance = 300 dollars

Import duties = 900 (it is assume that these duties are non refundable)

Advertisement, sales staff salaries and trimming shrubs cost are recognize as expense in the relevant period.