Ritam Chemicals Ltd. holds 1,000 units of a product at a cost of Rs. 600 per unit. The expected selling price is Rs. 650 per unit and estimated costs necessary to make the sale are Rs. 80 per unit. At what amount should this inventory be carried?

Correct answer: B) Rs. 5,70,000

Explanation

Net realisable value = Rs. 650 - Rs. 80 = Rs. 570 per unit. Inventory is valued at the lower of cost (Rs. 600) and NRV (Rs. 570), so Rs. 570 x 1,000 = Rs. 5,70,000. A write-down of Rs. 30,000 is required. Rs. 6,00,000 is cost, Rs. 6,50,000 is selling price, and Rs. 5,20,000 wrongly deducts costs to sell from cost.