Paul incurs the following costs in relation to the construction of a new factory
ID: 2584038 • Letter: P
Question
Paul incurs the following costs in relation to the construction of a new factory and the introduction of its products to the local market
Site prepation cost 000
Matterial used 240 usd
labor cost including 90000 usd incured during an industrial dispute 1500 USD
No construction occued during the period of dispute 3190 USD
Testing of various process in factory 150 usd
consultancy fees re instalitation of equipment 220 USD
Relocation of taff to new factory 110 USD
General overheads 500 USD
Costs to dismantle the factory at end of its useful life in 10 years time 100 USD
hOW MUCH OF THE COSTS SHOULD BE CAPITALISED ?
Explanation / Answer
Particulars Cost Capitalisation Material used for site preparation $240,000 $240,000 Labour Cost $90,000 $88,500 Labour costs duing industrial dispute pending cannot be capitalised No construction cost during dispute $3,190 $0 Testing of various process in factory $150 $0 Consultation fee for re-installation of equipment $220 $220 Relocation of Taff $110 $110 General Overheads $500 $0 Costs to dismantle $100 $0 Total: $334,270 $328,830 Capitalisation of costs can be $328,830