Which of the following formulas would calculate the net realizable value of a product?
A) sales value at the split-off point less cost to produce up to the split-off point
B) sales value x constant gross-margin
C) final sales value minus cost of goods sold
D) final sales value minus separable costs

Question

Quizplus · Accepted Answer

The net realizable value formula is Final Sales Value - Separable Costs. This formula takes into account the costs that are specifically attributable to the product, and deducting them from the final sales value gives a better indication of the product's profitability. Choice A refers to the split-off point, which may not be relevant or accurate for all products. Choice B assumes a constant gross-margin, which may not be the case for all products or industries. Choice C refers to cost of goods sold, which may not capture all the costs associated with producing and selling the product.

Which of the Following Formulas Would Calculate the Net Realizable