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Financial Accounting (12th Edition...

12th Edition
C. William Thomas + 2 others
Publisher: PEARSON
ISBN: 9780134725987
BuyFind

Financial Accounting (12th Edition...

12th Edition
C. William Thomas + 2 others
Publisher: PEARSON
ISBN: 9780134725987

Solutions

Chapter 6, Problem 1QC
Textbook Problem

Ravenna Candles recently purchased candleholders for resale in its shops. Which of the following costs would be part of the cost of the candleholder inventory?

  a.    Advertising costs

  b.    Freight in

  c.    Freight out

  d.    Purchasing agent wages

Expert Solution
To determine

Determine from the following which cost is included in the cost of inventory.

Answer to Problem 1QC

Option: (b) Freight in

Explanation of Solution

Inventory costs:

Inventory costs are the costs which are related with the obtaining, storage and management of inventory, it includes ordering costs and carrying costs.

  1. (a) Advertising costs are costs which are included in the advertisement expenses.
  2. (b) Freight in is a cost which incurred at the time of purchase of inventory. Hence it is included in the cost of inventory.
  3. (c) Freight out is a cost which incurred at the time of sale of inventory. Hence, it is included in the sales related expenses.
  4. (d) Purchasing agent wages are expenses which are included in the wages and salaries expenses

Hence, option (b) Freight in is the correct answer.

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