ACCA Applied Knowledge · Financial Accounting · Inventories
At the year end, Marlow Co holds 400 units of product Z. Each cost $25. The expected selling price is $30 per unit, but the units need repackaging at a cost of $2 per unit, and selling costs will be $4 per unit. At what amount should the 400 units be included in inventory?
The units should be valued at $9,600. Net realisable value is selling price of $30 less repackaging of $2 and selling costs of $4, giving $24 per unit. This is lower than cost of $25, so the lower figure is applied to all 400 units.
- A$10,000
- B$9,600Correct
- C$11,200
- D$10,400
Explanation
NRV per unit = 30 - 2 - 4 = $24, which is below cost of $25. Inventory = 400 x 24 = $9,600. $10,000 ignores the cost to complete and sell, and $10,400 deducts only the selling costs.
Did you get it right without looking?
One question tells you little. A timed set on Inventories shows your real accuracy, how long you take and where you lose marks.
More Inventories questions
- In a period of rising purchase prices, compared with the weighted average cost method, FIFO will normally result in which one of the followi…
- Kestrel Co bought 1,000 units of a component for $12 each. It paid $800 for delivery to its warehouse, $300 for import duties that are not r…
- Which one of the following inventory costing methods is NOT permitted under IAS 2 Inventories?
- Kestrel Ltd's year end is 31 December. The inventory count took place on 4 January and valued inventory at $120,000 at cost. Between 1 and 4…
- Marlow Co had no opening inventory. It purchased 100 units at $10 each, then 200 units at $13 each, and then sold 150 units. Using the FIFO …
- Opening inventory was $52,000, purchases $410,000, carriage inwards $6,000, returns outwards $9,000 and closing inventory $47,000 at cost. A…