Raw materials may remain measured at cost rather than being written down when:
Correct answer: B. The related finished goods will sell above their cost
- A. Their purchase price has increased sharply
- B. The related finished goods will sell above their cost
- C. They have been held for more than one year
- D. The production manager expects higher wages
Explanation
Raw materials are not written below cost when the finished products in which they will be used are expected to sell at or above cost. Their recoverable amount is assessed in relation to the finished goods.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? support@testustad.com
About Inventory Valuation
Inventory valuation determines the cost of unsold goods and its effect on cost of sales and profit. The work covers inventory counts, included costs, FIFO and weighted-average costing, and the rule that inventory is reported at the lower of cost and net realisable value, not simply at its expected selling price.
Practise Inventory Valuation
34 free Inventory Valuation MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Accounting questions like this
Accounting is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Inventory Valuation questions
When production is abnormally low because of an unexpected factory shutdown, the unallocated fixed overhead is generally:
Which cost is included in inventory when it is directly attributable to bringing the goods to their present condition?
A retailer has 80 units costing Rs. 15 each and buys 120 more units at Rs. 20 each. Under a periodic weighted average method, the cost per unit is:
Which item is deducted from the purchase price when determining the cost of inventory under IAS 2?
A business has 100 units in stock at Rs. 10 each and buys 100 more units at Rs. 14 each. It then sells 120 units. Under a perpetual moving average method, what is the value of the closing inventory?
Goods sent to an agent on consignment remain part of the inventory of which party until they are sold to a customer?