ACCA MA · Chapter 3 · Question 10 of 10
Under absorption costing, which of the following costs would be included in the value of finished goods inventory?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Depreciation of production machinery
Explanation
Inventory is valued at production cost, which includes direct costs and production overheads such as depreciation of production machinery. Selling, administration and distribution costs are period costs and are charged to profit or loss in the period they are incurred.
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