The following information relates to the total production costs and estimates of realisable value for a line of water pistols produced by Splash Happy Co LtD.

Packaging and transport costs are necessarily incurred in order to be able to sell the inventory. What is the value of the inventory in accordance with AASB 102?
A) $37,000
B) $21,000
C) $39,000
D) $36,000
E) None of the given answers.

Question

The following information relates to the total production costs and estimates of realisable value for a line of water pistols produced by Splash Happy Co LtD.

Packaging and transport costs are necessarily incurred in order to be able to sell the inventory. What is the value of the inventory in accordance with AASB 102?
A) $37,000 
B) $21,000 
C) $39,000 
D) $36,000 
E) None of the given answers.

Quizplus · Accepted Answer

According to AASB 102, the inventory value should be calculated as lower of cost and net realisable value. Here, the cost of production is $30,000 ($25,000 + $3,500 + $1,500), and the estimated cost to sell is $6,000 ($4,000 + $2,000). Thus, the total cost including packaging and transport costs is $36,000. The net realisable value is $36,000 ($15*2,000). Since the net realisable value is lower, the inventory value is $36,000. Therefore, the correct answer is option D.

The Following Information Relates to the Total Production Costs and Estimates