Question

Inventory costs: expensed vs. capitalized Assume that during a year, a table manufacturing company produced 900,000 finished tables incurring raw material costs of 9 million, direct labour conversion costs of 18 million, and production overhead costs of 1.8 million. scrapped 1,000 tables (attributable to abnormal waste) incurring raw material costs of 10,000 and labor and overhead conversion costs of 20,000. spent 1 million for freight delivery charges on raw materials and 500,000 for storing the finished goods as inventory What should be expensed and what should be capitalized? Source: CFA Institute

Answer 1

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