Question

Non-production overheads are usually omitted from stock valuation for the following reason :

• A. They are outside the control of production management.
• B. They are incurred after the stock has been brought to its present location and condition.
• C. They cannot be identified with individual products.
• D. They are fixed period costs.

Answer 1

The correct option is B They are incurred after the stock has been brought to its present location and condition.

SSAP 9 defines that the valuation of stock is to be done on cost or realizable value whichever is less. Cost is further defines as the cost of raw material, labour, expenses and overheads which are incurred for bring the stock at its location and condition.

Non- production overhead are expenses which are incurred after the stock has been brought to its present location and condition.