Hi, I need help with home work. Question: Replacement value and Net realizable v
ID: 2729210 • Letter: H
Question
Hi, I need help with home work.
Question: Replacement value and Net realizable value:
Information:
Products
A
B
C
D
E
F
Cost
$ 5.50
$4.80
7.58
9.00
1.50
3.75
Replacement Cost
6.50
5.00
6.50
7.50
3.00
4.50
Expected Selling Price
11.00
3.00
8.00
9.50
10.00
4.00
Cost to Complete or sale
4.50
2.00
3.00
5.50
2.50
2.00
Normal Profit (Assuming) (15%)
Instructions:
[1] You will create three tables to determine the Net Realizable Value = Ceiling ;
Net Realization Value = Floor;
Value will be used as the market amount
[2] Please explain each value will be used as the market amount
[3] Please provide a clear calculation and brief explanation.
Products
A
B
C
D
E
F
Cost
$ 5.50
$4.80
7.58
9.00
1.50
3.75
Replacement Cost
6.50
5.00
6.50
7.50
3.00
4.50
Expected Selling Price
11.00
3.00
8.00
9.50
10.00
4.00
Cost to Complete or sale
4.50
2.00
3.00
5.50
2.50
2.00
Normal Profit (Assuming) (15%)
Explanation / Answer
MArket value of Inventory = Current Replacement cost
Net Realisable value = Estimated Selling Price - Cost to Complete or sale
Upper limit of MArket = Net Realisable vlaue
Lower limit of MArket = Net realisable value - Normal profit margin(Percent of Selling Price) eg product A selling price = $11 , profit margin =15% Profit margin Amount = 11*15% = 1.65
If Replacement cost is greater than Net realisable value , NRV is market
If Replacement cost is less than (NRV - normal profit), then (NRV - normal profit) is market
Product Net Realisable value A 11-4.50 = 6.50 B 3-2 = 1 C 8-3 = 5 D 9.5-5.5 = 4 E 10-2.50 = 7.5 F 4-2 =2Related Questions
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