Example of Inventory Cost

Example of Inventory Cost

The inventory cost includes all cost which is incurred to bring the inventory it present location and condition. These costs may purchase price, import duties and other direct taxes, freights charges .The cost which are not part of inventory costs are storage cost, selling cost, wastage of material.

Example # 1

ABC & Co purchase rice amounting 5 kg $100, the direct tax on purchase is applicable @ 5%, inward charges are $ 50. The storage cost per Kg is $ 5. What would be the value of rice at the closing of financial statement?

Solution

Cost	$ 100
Direct Taxes	$    5
Freight Charges	$    2