ICAEW BIP · Chapter 1 · Question 9 of 10
In a manufacturing business, which of the following costs would be included in the valuation of finished goods inventory under absorption costing principles?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) The salary of the production line supervisor
Explanation
Inventory is valued at production cost, which includes direct costs and production overheads such as the production supervisor's salary. Advertising and delivery are selling and distribution costs, and bank interest is a finance cost. These are period costs written off in the period in which they are incurred.
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