Explanation:

- Option 1: Administrative overheads that do not contribute to bringing the inventories to their present location and condition are not included in the cost of inventory. They are considered period costs and expensed in the period they are incurred.

- Option 2: Storage costs which are necessary in the production process prior to a further production stage can be included in inventory costs. These costs are directly related to production and help bring the inventory to its current condition.

- Option 3: Selling and distribution costs are not included as they occur after the inventory is ready for sale and relate to delivering the product to customers.

- Option 4: Duties and taxes paid on purchases that are recoverable from tax authorities are not included in the cost of inventory. These recoverable taxes are usually accounted for separately.

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