An entity produces gaskets. The selling price of a gasket is Currency Units (CU) 80. The cost of direct and indirect material per unit is CU 70, general administration cost per unit is CU 12 and the selling cost per unit is CU 3. At which amount should each gasket be accounted for in the balance sheet at 31 December 20x8 according to IAS 2?
CU 73
CU 70
CU 79
CU 67
According to IAS 2, inventory should be stated at the lower of cost or net realizable value. In this case, the cost of the gaskets would include the direct and indirect material cost, as well as the general administration cost incurred in producing the gaskets. Therefore, each gasket should be accounted for in the balance sheet at its cost, which is CU 70 for direct and indirect material plus CU 12 for general administration cost, totaling CU 82. The selling cost, being a period cost, is not included in the cost of inventory under IAS 2. Hence, the gasket should be accounted for in the balance sheet at CU 82.
