Question

A car dealer acquires a used car for \(14,000, with terms FOB shipping point. Additional costs in obtaining and offering the car for sale include:

• \)250 for transportation-in.
• \(300 for insurance during shipment.
• \)900 for import duties.
• \(150 for advertising.
• \)1,250 for sales staff salaries.

For computing inventory, what cost is assigned to the used car?

Short answer

The total cost assigned to inventory equals$15,450.

Step-by-step solution

Definition of Import Duties

The duties collected by the country’s customs department on the goods imported from other countries are known as import duties. It is generally charged to reduce the imports.

Cost Assigned to Car

Particular	Amount $
Cost of Car	$14,000
Add: Transportation-in	250
Add: Insurance during shipment	300
Add: Import duties	900
The total cost of car	$15,450