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Supplementary objective test questions

14.3 Which of the following statements about the treatment of inventory and
work in progress in financial statements are correct?

(1) Inventory should be valued at the lower of cost, net realisable value and
replacement cost.

(2) In valuing work in progress, materials costs, labour costs and variable and
fixed production overheads must be included.

(3) Inventory items can be valued using either FIFO or weighted average cost.

(4) A company’s financial statements must disclose the accounting policies
used in measuring inventories.

A All four statements are correct

B (1), (2) and (3) only

C (2), (3) and (4) only

D (1) and (4) only

CHAPTER 15 – THE MANUFACTURING ACCOUNT

15.1 The following information relates to a business entity for the year ended
31 December 20X2:

Inventory at 1 Jan 20X2 $
Raw materials 20,000
Work in progress 4,000
Finished goods 68,000
Inventory at 31 Dec 20X2
Raw materials 22,000
Work in progress 8,000
Finished goods 60,000
Purchases of raw materials 100,000
Direct wages 80,000
Royalties on goods sold 6,000
Production overheads 120,000
Distribution costs 110,000
Administration expenses 140,000
Sales 600,000

What was the cost of goods manufactured for the year ended
31 December 20X2?

$ __________.

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