CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

During the past year, a company's production facility was operating at 75% of capacity. The firm's costs were as follows ($ millions):

Fixed production overhead costs: 3
Raw materials costs: 6
Labor costs: 4
Freight-in costs for raw materials: 1
Warehousing costs for finished goods: 2

The firm ended the year with no remaining work-in-process inventory. The total capitalized inventory cost (in $ millions) for the year is closest to ______.
A. 11.25
B. 13.25
C. 15.25
Explanation: Fixed Production Costs: 75% of capacity: 75% x $3: 2.25
Raw materials: 6.00
Labor Costs: 4.00
Freight In: 1.00
Total Capitalized Inventory Cost: 13.25

User Contributed Comments 3

User Comment
sarasyed5 why is warehouse cost not included?
beerfome Warehouse cost is not include in production cost, because it is used for finish goods
markbucfa Warehouse costs are not included into product costs even if it is used to "presserve" the finished goods.
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