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Hi Sir,
I think it would be useful to include in the course notes (in bold) that each item of inventory must be valued separately and that it is completely wrong to calculate to total cost per unit (in example 4 in the lecture it is $28) and the total net realisable value per unit (in example 4 in the lecture it is $30) and then to multiply the total number of units (in example 4 it is 450 units) by the lower figure.
You mention very very briefly in the lecture that we look at each product individually and I think that it would be very helpful to everyone who is new to this topic if you include this fundamental clarification in the course notes.
Thank you.
Thank you for your comment, which I have noted.
(Although example 4 is certainly not completely wrong, since clearly from the question the costs to date and further costs to be incurred apply to all the units of each product. Indeed the question is an fact an old exam question 🙂 )
We are learning and we a truly grateful JOHN.
As for the math,that is an exceptional and acceptable error that qualifies us as human.
Thank you once more for the effort and time you invest in teaching us.I do not take it for granted
Thank you very much for the comment 🙂
Great lectures but i think between 6 and 4,, cost and NRV …the valuation should be 4 and not 6 sir. IAS16
Hello. Thank you so much for your lectures. Everything is clear so far. I just want to know why we should to show the lower of two numbers….i mean what is aim?
Because we don’t want to take profits before we have actually sold and made the profit, but we should recognise any loss as soon as we become aware that it is going to happen.
Now its clear. Thanks.
If cost is low and NRV is high, we take cost because the goods have not been sold. But when NRV is low and cost is high, why do we take cost? if the goods aren’t sold then why do we take it at cost?
We are required to value at the lower of cost and net realisable value.
So if the NRV is lower than cost we value at the NRV – we do not value at cost as you have written.
According to the BPP textbook, selling costs ‘would not be included in cost of inventories. Instead, they should be recognised as an expense in the period they are incurred.’
Could you please explain? (Thank you in advance).
Whereas in your lecture presentation you included selling costs in the calculation of NRV.
We certainly do not include selling costs when getting the cost of inventories – we only include production costs.
However, we DO subtract selling costs from the selling price when calculating the net realisable value – that is done for completely different reasons as I explain the lecture.
Hello John Moffat,
Please kindly ignore those yapping on endlessly about a slight written mistake. You said the right thing, followed the right principle and got the right answer.
We are all human and humans make mistakes which only makes us more human.
Please give the tutor a break and take what you have to learn from it and move on.
After all he has passed through the exams and is qualified and we are still learning. let us all stay focused and move on.
Thanks.
Great lesson as usual, the tutor is only human and as we all know human makes mistakes, though he done his calculation right and even took the lower value “6” right. The ones that are moaning needs to use some common sense.
he wrote both part b and c wrongly…. dis tutor shud beter take some math classes… :p
@khanmashal63, before sending others to school, you better learn how to spell 🙂
maybe you should take some english classes before you mock his math
Because 11-4 = 7
As you can hear that …
He wrote it wrong.. But said it Rite
@mosaraj, You are right. He should write 7 despite 4
Right. He recorded at 6. hehehe