CERTYNEX IFRS ACADEMY

Sorlan incurs two administrative costs: 90,000 for the management and administration team of its factory, and 140,000 for the group finance department, which plays no part in production. How should these costs be treated in measuring inventories?

Both costs are excluded from the cost of inventories, because they are administrative costs.

The factory's 90,000 is a fixed production overhead allocated to inventories; the 140,000 is expensed.

Both costs are included, because the group finance department benefits the whole activity of the entity, including the factory's production.

The finance department's 140,000 is included, the factory's 90,000 being expensed.