The Following Inventory Information Was Taken from the Records of Kleinfeld

question 14

Multiple Choice

The following inventory information was taken from the records of Kleinfeld Inc.: $\begin{array}{ll}\text { Historical cost } & \$ 12,000 \\\text { Replacement cost } & \$ 7,000 \\\text { Expected selling price } & \$ 9,000 \\\text { Expected selling cost } & \$ 500 \\\text { Normal profit margin } & 50 \% \text { of price }\end{array}$
-Under IAS 2, what should the balance sheet report for Inventory?

• A)$7,000
• B)$8,500
• C)$7,600
• D)$9,000

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Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead rate incurred and the standard rate, multiplied by the actual activity level.

Standard Cost

The predetermined cost of manufacturing a single unit or a number of units during a specific period under normal conditions.

Raw Materials Quantity Variance

The difference between the actual quantity of raw materials used and the expected quantity of raw materials based on the standard cost, which indicates efficiency in using materials.

Standard Cost System

An accounting system that uses standard costs for product costs, serving as a tool for planning, controlling, and decision making.