A manufacturer must capitalize the following costs relative to inventories:
A) Only I.
B) Only I and II.
C) Only II and III.
D) I, II, and III.
E) None of the above.

Question

A manufacturer must capitalize the following costs relative to inventories: 
A) Only I. 
B) Only I and II. 
C) Only II and III. 
D) I, II, and III. 
E) None of the above.

Quizplus · Accepted Answer

I. Direct costs of materials and labor.
II. Indirect costs that are incurred to acquire or produce the inventory.
III. Production costs that are allocable to the inventory because of normal production processes.

A Manufacturer Must Capitalize the Following Costs Relative to Inventories