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Hi john sir..May God bless you with a happy proslerous life.
Johan sir plz help me with the folliwing.
ABC produces a product “Z”. The related data for the year ended 2003 is as follow.
Selling price/unit £10
Annual variable selling cost £65000
Annual units sales 65000However the company estimates that selling expenses will increase by 10% in Jan 2004.
Req. Find NRV
Solution as per book:
£
Selling price/unit 10
V.selling cost/unit (1.1)…..1×1.10
NRV 0.9But sir..variable is expected to increase in Jan 2004 not in 2003. In 2003 variable selling cost/unit should be £65000/65000= 1. It does’t make any sense to me..plz guide me about this point.
I don’t think you can have copied out the whole question.
Since the date given is for the year ended 2003, then 2003 must be in the past. I assume therefore that the want information for 2004.
If this was a past exam question or a question in the BPP Revision Kit then tell me which questions so that I can check the wording for myself.
Yeah you r right to say that i did’t type the whole question just to save your time. John sir i used the same wording which is related to NRV.(Whichbis written above)..The other data is just for cost/unit under..but if u say i’ll type the whole..just point of confusion is that why he incorporated the increase in v.selling cost in 2003..whereas the change is from 2004..is the answer wrong in the book?
If the selling cost was $1 per unit in 2003, then in 2004 it will be 10% higher than in 2003 and so in 2004 it will be $1.10 per unit.
Therefore the net realisable value of inventory at the end of 2003 will be the lower of cost and the net realisable value. The net realisable value is the expected selling price (which will still be $10 per unit on the basis of what you have typed, less the estimated future selling costs, which will be $1.10 per unit on the basis of what you have typed.
Have you watched my free lectures on the valuation of inventory? The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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