The net realisable value of an item of inventory is likely to be lower than cost in the situation where "The item is becoming obsolete".

Here's why:

a. If demand for the item is increasing, it's likely that the selling price will increase, which would increase the net realisable value, not decrease it.

b. If the production cost of the item has been falling, this would increase the profit margin, which would again increase the net realisable value, not decrease it.

c. If the selling price of the item has been rising, this directly increases the net realisable value.

d. If the item is becoming obsolete, this means that demand for the item is likely falling. If demand is falling, the selling price will likely have to be reduced to move the inventory. This reduction in selling price would decrease the net realisable value.

Question

The net realisable value of an item of inventory is likely to be lower than cost in the situation where "The item is becoming obsolete".

Here's why:

a. If demand for the item is increasing, it's likely that the selling price will increase, which would increase the net realisable value, not decrease it.

b. If the production cost of the item has been falling, this would increase the profit margin, which would again increase the net realisable value, not decrease it.

c. If the selling price of the item has been rising, this directly increases the net realisable value.

d. If the item is becoming obsolete, this means that demand for the item is likely falling. If demand is falling, the selling price will likely have to be reduced to move the inventory. This reduction in selling price would decrease the net realisable value.

Knowee AI · Accepted Answer

The net realisable value of an item of inventory is likely to be lower than cost in the situation where "The item is becoming obsolete".

Here's why:

a. If demand for the item is increasing, it's likely that the selling price will increase, which would increase the net realisable value, not decrease it.

b. If the production cost of the item has been falling, this would increase the profit margin, which would again increase the net realisable value, not decrease it.

c. If the selling price of the item has been rising, this directly increases the net realisable value.

d. If the item is becoming obsolete, this means that demand for the item is likely falling. If demand is falling, the selling price will likely have to be reduced to move the inventory. This reduction in selling price would decrease the net realisable value.

In which of the following situations is the net realisable value of an item of inventory likely to be lower than cost?a.Demand for the item is increasing.b.The production cost of the item has been falling.c.The selling price of the item has been rising.d.The item is becoming obsolete.Clear my choice

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