Which of the following statements is correct in relation to the costing of inventories?
A)Direct costing treats fixed production costs as an expense of the period and is not permitted as a method for valuing inventories under IAS 2.
B)Absorption costing treats fixed production costs as a product cost, allocating them to the goods produced, and is not permitted as a method for valuing inventories under IAS 2.
C)Absorption costing treats fixed production costs as an expense of the period and is the required method for valuing inventories under IAS 2.
D)Direct costing treats fixed production costs as a product cost, allocating them to the goods produced, and is not permitted as a method of valuing inventory under IAS 2.

Question

Quizplus · Accepted Answer

Direct costing, also known as variable costing, treats fixed production costs as an expense of the period and is not permitted as a method for valuing inventories under IAS 2. Instead, IAS 2 requires the use of absorption costing, which treats fixed production costs as a product cost, allocating them to the goods produced.

Which of the Following Statements Is Correct in Relation to the Costing