A Accounting

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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