# Inventoriable Cost  ## What is Inventoriable Cost?

Inventoriable Cost is the total direct expense incurred by a manufacturing firm that includes a) cost related to the purchase of inventory (raw material, WIP, Finished Goods) and b) cost that is incurred to manufacture the goods till the point of sale.

### Formula

Inventoriable Cost = Total Direct Material + Total Direct Labor + Direct Overheads + Freight Inwards

For eg:
Source: Inventoriable Cost (wallstreetmojo.com)

### Examples of Inventoriable Cost

Let’s take some examples for better understanding.

You can download this Inventoriable Cost Excel Template here – Inventoriable Cost Excel Template

#### Example #1

ABC limited is provided data related to manufacturing for the month of march’19.

• Raw Materials: \$180,000
• Direct Wages: \$90,000
• Machine Hours Worked (hour): \$10,000
• Machine Hour Rate (per hour): \$8
• Selling Overheads per Unit: \$5
• Units Produced: 4000
• Units Sold: 3600
• Selling Price Per Unit: \$125

Solution:

Step 1: Calculation

= 180000 + 90000 + 80000 = 350000

Step 2: Calculation showing the deriving value of the closing stock.

Total Value of Closing Stock = 400 * 87.5 = 35000

Thus, total inventoriable value of ABC limited for the month of March’19 is \$ 3, 50,000.

Note: Cost related to administration overhead and selling overhead are in nature of period cost, and hence the same is ignored during the calculation of inventoriable cost.

#### Example #2

Below is the data related to the manufacturing of pencil in XYZ Corporation :

Calculate the following:

Solution:

Step 1: Calculation of Raw material consumed

Raw Material Consumed = 60000 + 480000 + (-50000) = 490000

Step 2: Calculation of Prime cost.

Prime Cost = Raw material Consumed + Direct Labor + Direct Expenses

Prime Cost = 490000 + 240000 = 730000

Step 3: Calculation

= 730000 + 100000 + 12000 + (-15000) + 90000 + (-110000) = 807000