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

Answer options:

Marketing and selling expenses.

Research and development.

General management salaries.

Warehousing and storage costs.

How to approach this question

Distinguish between production/storage costs (Capitalize) and selling/general admin costs (Expense).

Full Answer

D.Warehousing and storage costs.✓ Correct

UNICAP requires capitalization of direct materials, direct labor, and applicable indirect costs (overhead) related to production or resale. Warehousing/storage is an indirect cost that must be capitalized. Marketing, R&D, and general management are period expenses.

Common mistakes

Expensing warehousing costs.

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