In addition to finished goods, under the rules, inventory costs include the purchase price of any raw materials, shipping costs, and any indirect costs the business allocates to inventory.

In addition to finished goods, under the uniform cost capitalization rules, inventory costs include the purchase price of any raw materials, shipping costs, and any indirect costs the business allocates to inventory.

Explanation:

For the production of any goods or services that you sell to the consumer, any business need to invest in the machine, labors, raw materials that are essential in making those goods, etc. These comes under the UNICAP which is uniform cost capitalization.

This means that you have to invest on something in order to run your business. It views the finished goods that are ready to consume as the investment that you make on something to produce those goods. The finished goods are seen as the assets that you will be reselling to cover the cost that is initially invested.

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