Mill Co., a calendar-year manufacturer, which uses the FIFO inventory method, previously allocated production costs to inventory by use of a burden rate based on the ratios of total indirect production costs incurred during the year compared to total direct labor costs during the year. Mill Co. incurred the following costs during the year:

1. Direct material …………………………………………………………………….             $500,000
2. Direct labor 1,500,000
3. Indirect costs inventoried under pre-1986 TRA law …………………..     1,500,000
4. Additional costs inventoried under Code Sec. 263A …………………          750,000
5. Ending inventories prior to the capitalization

of additional Code Sec. 263A costs……………………………………………..      700,000

6. Mill Co. had an inventory turnover rate of five times.

Compute the total amount of additional Code Sec. 263A costs to capitalize for FIFO inventory under the simplified production method.

Answer rating: 100% (QA)

Additional Sec 263A costs allocable to the eligible property remaining on hand at ... View the full answer