Cost of inventory of 100 units: purchase ₹10,000 (GST ₹1,800 credit available), labour ₹3,000, unloading ₹200, abnormal wastage ₹500. Inventory value:
A₹13,700 (includes wastage cost)
B₹13,200 (excludes GST + wastage)
C₹13,000 (excludes unloading too)
D₹15,000 (includes everything)
Answer & Solution
Correct answer: B. ₹13,200 (excludes GST + wastage)
1. GST is recoverable, so excluded: cost of purchase = ₹10,000.
2. Direct conversion labour ₹3,000 added: 10,000 + 3,000 = ₹13,000.
3. Unloading is a cost to bring to present location: + ₹200 = ₹13,200.
4. Abnormal wastage ₹500 excluded per AS 2.
5. Final inventory cost = ₹13,200.
_Source: ICAI BoS Foundation Paper 1, Ch 4 "Inventories", §3 example_
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