Question: ABC Trading Co. commenced operations during the year as a large importer and exporter of sundries. The imports were all from one country overseas and

ABC Trading Co. commenced operations during the year as a large importer and exporter of sundries. The imports were all from one country overseas and purchases were made and costs were incurred evenly throughout the year. The export sales were conducted as drop shipments. ABC never actually took possession of the goods, which were merely transshipped at Houston. ABC Trading reported the following data:

Purchases during the year $ 15 million
Shipping costs from overseas $ 1.5 million
Shipping costs to export customers $ 1.0 million
Inventory at year-end, before including any shipping costs $ 3.0 million

What amount of shipping costs should be included in ABC Trading's year-end inventory valuation?

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