Cost of inventories comprises
• all costs of purchase,
• costs of conversion and
• other costs incurred in bringing the inventories to their present location and condition.
Other costs are included in the cost of inventories only to the extent that they are incurred in bringing the inventories to their present location and condition.
Following costs are excluded from the cost of inventories and recognized as expenses in the period in which they are incurred are:
(a) abnormal amounts of wasted materials, labour or other production costs;
(b) storage costs, unless those costs are necessary in the production process before a further production stage;
(c) administrative overheads that do not contribute to bringing inventories to their present location and condition; and
(d) selling costs.