Value of inventory measured at lower at cost and NRV ( video below)
XYZ Co sells three products – A, B and C. The following information was available at the year end.
A | B | C | |
$ per unit | $ per unit | $ per unit | |
Original cost | 10 | 13 | 9 |
Estimated selling price | 13 | 15 | 19 |
Selling and distribution costs | 5 | 8 | 9 |
units | units | units | |
Units of inventory | 200 | 150 | 300 |
What is the value of inventory at the year end?
Answer
Inventories are measured at the lower of cost and net realisable value (NRV).
Net realisable value = estimated selling price in the ordinary course of business – the estimated costs of completion – the estimated costs necessary to make the sale
Net | Lower of | |||
Cost | realizable value | cost & NRV | Units | Value |
$ | $ | $ | ||
A | 10 | 8 | 8 | 1600 |
B | 13 | 7 | 7 | 1,050 |
C | 9 | 10 | 9 | 2,700 |
value of inventory at the year end | 5,350 |
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