MI – May 2016 – L1 – SA – Q2 – Accounting for Cost Elements

Identify the item not included in the cost of inventory in storage.

Question

Which ONE of the following is NOT included in the cost of inventory in storage?

A. Direct materials cost
B. Direct labour cost
C. Direct expenses
D. Period cost
E. Production overhead

Answer

Answer: D

Explanation:

The correct answer is D (Period cost). Period costs are expenses that are not directly tied to the production process, such as administrative expenses, selling expenses, and general overheads. These costs are not included in the cost of inventory but are expensed in the period they are incurred.

Tags: Inventory Costing, Managerial Accounting, Period Cost
Level: Level 1

Topic: Accounting for Cost Elements
Series: MAY 2016

Uploader: Kwame Aikins