IAS 2 - Inventories

Question 0

What is the definition of inventory that is interchangeable and not interchangeable?

Answer 0

INTERCHANGEABLE : Inventory which has been manufactured or purchased at different prices.

NOT INTERCHANGEABLE : Inventory which has been manufactured or purchased at the same price.

Question 1

How should inventories be measured?

Answer 1

At the lower of cost and net realisable value

Question 2

How is the cost of Inventory which is classed as not interchangeable determined?

Answer 2

STANDARD COST : Cost is based on normal levels of materials and supplies, labour efficiency and capacity utilisation.

RETAIL METHOD : Cost is determined by reducing the sales value of the inventory by the appropriate percentage gross margin.

Question 3

How is the cost of Inventory which is classed as interchangeable determined?

Answer 3

FIFO First in, first out

OR

Weighted average cost

Question 4

What is net realisable value?

Answer 4

The net realisable value is the estimated selling price in the ordinary course of business less:
> Estimated costs of completion, and
> Estimated costs necessary to make the sale such as marketing, selling and distribution costs.