Which of the following costs can be included in the cost of inventory under IAS 2?

Correct answer: A) Fixed production overheads allocated on the basis of normal production capacity

Explanation

Cost of inventory includes purchase costs, conversion costs (direct labour and a systematic allocation of fixed and variable production overheads, with fixed overheads based on normal capacity) and other costs of bringing the inventory to its present location and condition. Abnormal waste, selling costs and unrelated administrative overheads must be expensed when incurred.