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
| Cost | Net realizable value | Lower of cost & NRV | Units | Value | |
| $ | $ | $ | $ | ||
| A | 10 | 8 | 8 | 200 | 1,600 |
| B | 13 | 7 | 7 | 150 | 1,050 |
| C | 9 | 10 | 9 | 300 | 2,700 |
| value of inventory at the year end | 5,350 | ||||