Under the Uniform Capitalization Rules (UNICAP) of IRC §263A, which of the following costs must be capitalized into inventory for a manufacturer?

Answer options:

Marketing and selling expenses.

Research and development.

Warehousing and storage costs.

General management salaries.

How to approach this question

UNICAP = Direct Materials + Direct Labor + Factory Overhead (including warehousing). Selling/General Admin are expensed.

Full Answer

C.Warehousing and storage costs.✓ Correct

UNICAP requires capitalization of direct materials, direct labor, and indirect costs allocable to production, such as factory overhead, warehousing, and storage. Selling, marketing, and general administrative costs are period expenses.

Common mistakes

Capitalizing selling expenses.

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