PRC-1 · Chapter 7 · Question 96 of 100
According to IAS 2, how should variable production overheads (like electricity used by manufacturing machinery) be allocated to inventory units?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Based on the actual use of the production facilities (actual production).
Explanation
Unlike fixed overheads (which are allocated based on normal capacity), variable production overheads vary directly with the volume of production and are allocated to each unit based on the actual use of the production facilities.
More IAS 2: Inventories MCQs
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- Q100Which of the following items is explicitly prohibited by IAS 2 from being included in the cost of inventories?
- Q1Which of the following costs is NOT included in the cost of inventory according to IAS 2?
- Q2When calculating the Net Realizable Value (NRV) of an inventory item, which of the following is correct?