Page 45 - 5.2 i. Manac Costing ITC Summarised Notes
P. 45
ITC EXAM PREP
The valuation of inventory in terms of IAS 2
• If you were told in the question that the high level of
production is materially different from the normal
capacity and you are then asked what the value of closing
inventories should be in terms of IAS 2:
• As per IAS 2: In periods of abnormally high production,
the amount of fixed overhead allocated to each unit of
production is decreased so that inventories are not
measured above cost. This is done as follows:
1. Recalculate the allocation rate based on actual production:
R200 000 / 21 000 = R9.52 per unit (the old rate was R10 per
unit).
2. Difference between the old and new rate = R10 – R9.52 = R0.48
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