ACCA Applied Knowledge · Financial Accounting · Inventories
At the year end, a company holds 200 units of product Z. Each unit cost $15 to produce. Selling price is $22 per unit, but each unit needs $9 of further packaging and selling costs to be sold. What is the total value of product Z in the statement of financial position?
The inventory is valued at $2,600. Net realisable value per unit is $13 (selling price $22 less $9 costs to sell), lower than the $15 cost, so the 200 units are carried at 200 x $13 under the lower of cost and NRV rule.
- A$3,000
- B$2,600Correct
- C$4,400
- D$1,800
Explanation
Net realisable value per unit = 22 - 9 = $13, which is below cost of $15. Inventory is valued at the lower figure: 200 x 13 = $2,600. Using cost gives $3,000, which ignores the write-down needed.
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