alleryNet realisable value for raw materials is generally taken as:
ASelling price of raw mat
BAverage of last 5 prices
COriginal purchase cost only
DReplacement cost of raw mat
Answer & Solution
Correct answer: D. Replacement cost of raw mat
1. AS 2 states that for raw materials, replacement cost is generally treated as NRV.
2. Raw materials are not sold directly but converted; their economic value mirrors current replacement cost.
3. Selling price applies to finished goods, not raw materials.
_Source: ICAI BoS Foundation Paper 1, Ch 4 "Inventories", §3 ¶5_
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