Replacement value and Net realizable value: Products A B C D E F Cost $ 5.50 $4.
ID: 2727691 • Letter: R
Question
Replacement value and Net realizable value:
Products
A
B
C
D
E
F
Cost
$ 5.50
$4.80
7.58
9.00
1.50
3.75
Replacement Cost
6.50
5.00
6.50
7.50
3.00
4.50
Expected Selling Price
11.00
3.00
8.00
9.50
10.00
4.00
Cost to Complete or sale
4.50
2.00
3.00
5.50
2.50
2.00
Normal Profit (Assuming) (15%)
Instructions:
[1] You will create three tables to determine the Net Realizable Value = Ceiling ;
Net Realization Value = Floor;
Value will be used as the market amount
[2] Please explain each value will be used as the market amount
[3] Please provide a clear calculation and brief explanation.
Products
A
B
C
D
E
F
Cost
$ 5.50
$4.80
7.58
9.00
1.50
3.75
Replacement Cost
6.50
5.00
6.50
7.50
3.00
4.50
Expected Selling Price
11.00
3.00
8.00
9.50
10.00
4.00
Cost to Complete or sale
4.50
2.00
3.00
5.50
2.50
2.00
Normal Profit (Assuming) (15%)
Explanation / Answer
Calculation of NRV and market value
A
B
C
D
E
F
Selling price
11
3
8
9.50
10
4
Less: Cost to compete
4.5
2
3
5.5
2.5
2
Net realizable value (Ceiling)
6.5
1
5
4
7.5
2
Less: Profit 15% on sales
1.65
0.45
1.2
1.425
1.5
0.6
NRV less a normal profit (Floor)
4.85
0.55
3.8
2.575
6
1.4
Replacement cost (R)
6.5
5
6.5
7.5
3
4.5
Cost
5.5
4.8
7.58
9
1.5
3.75
Designated market value should be the cost (which is in between ceiling, floor, and R)
6.5
0.55
3.8
2.575
3
1.4
Lower market value (the lower of cost and designated market value)
5.5
0.55
3.8
2.575
1.5
1.4
A
B
C
D
E
F
Selling price
11
3
8
9.50
10
4
Less: Cost to compete
4.5
2
3
5.5
2.5
2
Net realizable value (Ceiling)
6.5
1
5
4
7.5
2
Less: Profit 15% on sales
1.65
0.45
1.2
1.425
1.5
0.6
NRV less a normal profit (Floor)
4.85
0.55
3.8
2.575
6
1.4
Replacement cost (R)
6.5
5
6.5
7.5
3
4.5
Cost
5.5
4.8
7.58
9
1.5
3.75
Designated market value should be the cost (which is in between ceiling, floor, and R)
6.5
0.55
3.8
2.575
3
1.4
Lower market value (the lower of cost and designated market value)
5.5
0.55
3.8
2.575
1.5
1.4