PRC-1 · Chapter 7 · Question 85 of 100
In a manufacturing entity, the valuation of Work-in-Progress (WIP) inventory shall include which of the following components?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Direct materials, direct labor, and a systematic allocation of fixed and variable production overheads.
Explanation
According to IAS 2, the cost of conversion (which applies to WIP and finished goods) includes direct costs (labor, materials) and a systematic allocation of fixed and variable production overheads.
More IAS 2: Inventories MCQs
- Q87Which of the following correctly defines 'under-absorbed' overheads in a manufacturing environment?
- Q88What is the required journal entry to adjust for 'under-absorbed' production overheads at the end of the accounting period?
- Q89Which of the following best describes a 'period cost' in accounting?
- Q90An entity purchases 100 units of raw materials. 5 units are completely destroyed during transit and are unsalvageable (abnormal loss). How…
- Q91During a month, a manufacturing business issued Rs. 20.2 million of direct materials to the factory. What is the correct double entry for…