Inventory Valuation Quiz

What is the definition of inventory according to AS 2 (Revised)?

• Assets that are not used in production

• Assets held for sale in the ordinary course of business

• Assets held for investment purposes

• Assets that are only raw materials

Which of the following is included in the cost of inventories?

• Selling and distribution costs

• Abnormal waste

• Costs of purchase

• Administrative overheads

What is excluded from the scope of AS 2 (Revised)?

• Finished goods

• Work in progress under construction contracts

• Raw materials

• Work in progress for manufacturing

Which cost formula is NOT mentioned in the text for inventory valuation?

• Specific Identification

• Last-In First-Out (LIFO)

• First-In First-Out (FIFO)

• Weighted Average Cost

What is the primary focus of AS 2 (Revised)?

• Valuation of fixed assets

• Valuation of inventories

• Valuation of liabilities

• Valuation of equity

Which of the following is a cost of purchase?

• Direct labor costs

• Purchase price including duties and taxes

• Storage costs

• Selling expenses

What should be the basis for allocating fixed production overheads?

• Market demand

• Historical costs

• Normal capacity

• Actual production levels

Which of the following is NOT a type of inventory?

• Finished goods

• Work in progress

• Financial instruments

• Raw materials

What is the treatment of abnormal losses in inventory valuation?

• Valued at market price

• Ignored completely

• Recognized as expenses

• Included in inventory costs

What is the net realizable value?

• Total cost of inventory

• Estimated selling price less costs of completion

• Cost of production

• Market value of inventory