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<p>a- First in First out</p> <p>b- Standard Cost</p> <p>c- Average Pricing</p> <p>d- Realizable Value</p> <p> </p>
D. Realizable Value (or Net Realizable Value)
The three valuation methods are (1) LIFO (2) FIFO (3)Weighted Average. (use of ACTUAL costs)
Standard cost is used as an alternative to cost layering systems such as LIFO and FIFO (uses ESTIMATED cost)
Inventories should be measured at the lower of cost or net realizable value (NRV). NRV is only a floor/ceiling to be considered in valuing and revaluing inventories.
Option A
As per IAS2 the two methods allowed for Inventory valuation are FIFO and WAC (Weighted Average Costs). LIFO is not allowed. Standard cost method and Retail cost method may be used for convenience, if the results approximate the actual cost. Net Realisable Value (NRV) is the estimated selling price of the inventory as reduced by the estimated cost of completion and and the estimated cost of sale and this NRV is used for Inventory valuation when the carrying amount of the inventories exceeds it's NRV. In view of all this I think the odd one out from the above4 options is (D) Realisable Value as it's used for inventory valuation only when there's a lower NRV and higher carrying amount.
Thanks Divyesh for the invitation :)
D. Realisable Value is not a costing method. It is only the value the inventory should be brought down to in case of impairment , obsoletion and other damage. Hence, it only comes into play when the inventory is inspected for its carrying value.
D. Realizable value is the sale price of an asset and not the method of inventory valuation.
i think average method is not standard method becaUSE mostly firms usess fifo method.
Option (D) Realizable Value
it's used for inventory valuation only when there's a lower NRV and higher carrying amount.
d- realizable value
