IAS 02: Inventories
1. The C. company is a manufacturing company. The cost per unit of inventory is as follows:
Material 25
Labor 33
Overhead 14
Administrative Expense 10
General administrative 10
Marketing 05
Requirement:
What’s the value of completed item of inventory?
Solution:
Completed item of inventory=
Material 25
Labor 33
Overhead 14
72
2. M company has partially completed inventory located in its manufacturing as follows-
Production cost incurred to date tk. 3500
Production cost to complete tk. 2000
Transportation cost to customer tk. 300
Future selling cost tk. 400
Selling price tk. 3200
Requirement:
As per IAS 2, what is the NRV of M company inventory?
Solution:
Selling price tk. 3200
Less: Production cost to complete (tk.2000)
Future selling cost (tk. 400)
Transportation cost (tk. 300)
NRV tk. 500
3. The R Company manufactures a single type of concrete mixing machine, which it sells to building
companies. R is currently considering the value of its inventories at
31 December 20X7. The following data are relevant at this date:
Cost per item BDT
Variable production costs 200,000
Fixed production costs 40,000
240,000
There are 85 mixing machines held in inventory.
The company has a contract to sell 15 concrete mixing machines at £225,000 each to a major local
building company in January 20X8. The normal selling price is £260,000 per machine. Selling
costs are minimal.
Requirement
What is the value of R's inventory at 31 December 20X7, according to IAS 2 Inventories?
Solution:
4. The U Company manufactures motors for domestic refrigerators. A major customer is The B.
Company, which is a major international electrical company making refrigerators as one of its
products. U is currently preparing its financial statements for the year to 31 December 20X7 and
it expects to authorize them for issue on 3 March 20X8. U holds significant inventories of motors
(which are unique to the B contract) as B requires them to be supplied on a just-in-time basis and
has variable production schedules. On 3 January 20X8, B announced that it was fundamentally
changing the design of its refrigerators and that, while this had been planned for some time, it had
not been possible to warn U for reasons of commercial confidentiality. As a consequence, it would
cease to use U's motors from 30 April 20X8 and would reduce production before that date. Details
for U are as follows:
Number of motors held in inventory at 31 December 4,000 motors
Expected sales in the four months to 30 April 20X8 1,600 motors
Net selling price per motor sold to B BDT 50
Net selling price per motor unsold at 30 April 20X8 BDT 10
Cost per motor BDT 25
Requirement
At what value should the inventories of motors be stated by Utah in its statement of financial
position at 31 December 20X7 according to IAS 2 Inventories, and IAS 10 Events after the
Reporting Period?
Solution:
