PRACTICE QUESTIONS 2

The material is imported by the ABC Co. from America and there are the following expenses incurred on
manufacturing of goods .

Rs.
Purchase price of materials used 2,500,000
Volume rebate 380,000
Custom duty 500,000
Sale tax (Refundable) 870,000
Material handling charges 250,000
Discount allowed 550,000
Store rent 630,000
Indirect labour 740,000
Variable overheads 230,000
Depreciation 120,000
Material wasted 600,000
Commission to agent for selling the products 880,000

Required:
Calculate the value of inventory.

SOLUTION

Purchase price of materials used 2,500,000

Volume rebate (Trade discount so it will not be a part of cost/value of inventory) (380,000)
Custom duty 500,000
Material handling charges 250,000
Store rent 630,000
Indirect labour 740,000
Variable overheads 230,000
Depreciation (Dep on assets involved in manufacturing) so it will be a part of cost/value of inventory :) 120,000
value of inventory 4,590,000