CA Foundation · Accounting · Inventories
Gupta Industries values 400 units of finished goods at a standard cost of ₹75 per unit set at the start of the year. After a review, current actual cost per unit is ₹78, and the standard is revised to match it. The net realisable value is ₹74 per unit. At what amount should the stock be shown in the balance sheet under AS 2?
The stock should be shown at ₹29,600. The standard must be revised to ₹78 to approximate current cost, but AS 2 requires valuation at the lower of cost and net realisable value. Since NRV is ₹74 per unit, 400 units are valued at ₹29,600.
- A₹30,000
- B₹30,600
- C₹29,600Correct
- D₹31,200
Explanation
The outdated standard of ₹75 no longer approximates cost, so the revised cost of ₹78 per unit is used. AS 2 requires the lower of cost and net realisable value, so the value is ₹74 per unit. 400 × 74 = ₹29,600. Using ₹78 gives ₹31,200, which ignores the NRV write-down.
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