Question

SECTION A (40 marks): Answer ALL Questions in this section. QUESTION ONE a) Aseda Ltd incurred the following cost in its manufacturing operations GH¢ Cost of material purchase 20,000 Import duties 400 Trade discount @10% of purchase cost Cash discount 500 Irrecoverable taxes 1,000 Salary of factory plant operator 2,500 Direct labour 5,000 Salary of factory supervisor 4,000 Cost of expected production losses 800 Administrative overhead (Note) 16,000 Cost of storage of raw material for further processing 2,000 Marketing cost 6,000 Note The cost accountant of the company has indicated that 60% of the administrative overheads are non-productive Required Determine the cost of inventory of Aseda Ltd in accordance with IAS 2 inventories [6 marks] Page 1 of 6

Answer 1

a) Calculation of cost of inventory of Aseda Ltd in accordance with IAS 2 Inventories Cost of Material purchase Less: Trade discount @ 10% Import duties Irrevocable taxes Salary of factory plant operator Direct Labour Salary of factory supervisor Cost of expected production losses Administrative overhead (40% * 16,000) Cost of storage of raw material for further processing Cost of Inventory 20,000 -2000 18,000 400 1000 2500 5000 4000 800 6400 2000 40,100 Cash discount, Non-productive administrative overhead and Marketing cost are not included in the inventory cost because they are not directly related to the production of inventory.