CAF-5 · Chapter 1 · Question 6 of 10
A manufacturing company has partially completed Work-in-Process (WIP) inventory. The historical cost incurred to date is Rs. 16,000. The estimated final selling price of the completed product is Rs. 14,000. It will cost an additional Rs. 1,500 to complete the product, and selling costs will be Rs. 200. At what value should this WIP inventory be recorded?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Rs. 12,300
Explanation
Inventory must be valued at the lower of Cost (Rs. 16,000) or NRV. NRV = Estimated Selling Price (14,000) - Cost to Complete (1,500) - Selling Cost (200) = Rs. 12,300. Since NRV (12,300) is lower than Cost (16,000), it should be valued at Rs. 12,300.
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