Hi all,
The question is - are storage costs related to Inventory expensed or capitalized?
If storage costs are incurred during production then they should be capitalized, but otherwise, they should be expensed? Is this correct?
I thought I know this but got it wrong in my mock exam, so just to check if I got it.
Thank you!!
Hello there,
That’s correct. Anything that gets inventory to its present location and condition is capitalized, once it’s sat there and ready for sale, its expensed.
So if you need to temperature control raw materials as they’re being processed into the final product - this is correctly included in inventory costs.
But once its finished product, you’re only incurring storage costs because you haven’t sold it yet. These are no longer costs of getting the inventory to its present condition and location. They, as you say, are therefore expensed immediately.
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Great - I believe I wont forget it now Thank you!