Cost of inventories

In this paragraph, we won't go into the details of cost accounting calculation methods, but will confine ourselves to highlighting the traditional classifications of inventory costs according to five categories.

• Item cost

  This is the price you pay for an item. It includes the cost of the item itself and all other direct costs associated with making it available to the company (transport, insurance, taxes, etc.).

  For a manufactured item, these costs include materials, direct labor and overheads.

• Acquisition cost

  This is the cost of building up and renewing stock, and is added to the purchase price of the item. It includes all costs incurred in making purchases. The word "acquisition" is therefore to be understood in the broadest...