Question

A solar panel dealer acquires is used panel for $9,000, with terms FOB shipping point. Compute total inventory cost assigned to the used panel if additional costs include $1,500 for sales staff salaries. $280 for transportation-in by train. $110 for online advertising. $135 for shipping insurance. $550 for used panel restoration. $300 for lawn care.

Answer 1

Answer:

Total inventory cost is $9,965.

Step-by-step explanation:

The terms free on board FOB shipping point implies that the delivery of a good is taken by the buyer after it left the supplier's shipping dock. Therefore, any other relevant cost incurred afterwards will be paid by the buyer.

From the all the cost listed in the question, the $1,500 for sales staff salaries, $110 for online advertising, and $300 for lawn care are NOT related to the inventory cost because they are administrative and sales expenses.

Therefore, the total inventory cost can be calculated using the following relevant cost:

Acquisition cost = $9,000

Transportation-in by train = $280

Shipping insurance = $135

Used panel restoration = $550

Therefore, we have:

Total inventory cost = Acquisition cost + Transportation-in by train + Shipping insurance + Used panel restoration = $9,000 + $280 + $135 + $550 = $9,965.