You have been hired by Midwestern Products Co. to work in its accounting department. As part of your assignment, you have been asked to review the inventory costing procedures. In the past, the company has attempted to keep its inventory as low as possible to hedge against future declines in demand. One way of doing this has been to charge off as many costs as can be justified as expenses of the current period. Sales have declined, however, and the controller wants to include as many costs in ending inventory as possible in order to report a better income figure for the current year. Your study shows that the following costs have been consistently treated as period costs for financial reporting purposes:
Depreciation of plant
Fringe payroll benefits for factory personnel
Repairs of equipment
Salaries of supervisors
Warehouse rental for storage of finished products
Pension costs for factory personnel
Training program?all employees
Cafeteria costs?all employees
Depreciation and maintenance of fleet of delivery trucks
Which items do you suggest could be included as part of inventory costs? Evaluate the wisdom and propriety of making the suggested changes.
This question was answered on: Jul 11, 2017
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