Home › CA Inter › accounting › Valuation of Inventories (AS 2) › SR Ltd makes finished good MP from raw material …
SR Ltd makes finished good MP from raw material RP. Cost of MP is ₹27 per unit (material ₹12 + labour ₹8 + fixed overhead ₹7). Selling price of MP is ₹22 per unit; replacement cost of RP is ₹11.50 per unit. Closing stock: MP 4,200 units, RP 4,000 units. At what value per unit should the closing finished goods MP be carried under AS 2?
A₹27
B₹24.50
C₹22
D₹20
Answer & Solution
Correct answer: C. ₹22
1. AS 2 requires the lower of cost and NRV.
2. Cost is ₹27 and NRV (selling price) is ₹22.
3. Since NRV ₹22 is lower than cost ₹27, MP is valued at ₹22 per unit.
_Source: ICAI BoS CA Intermediate Paper 1 (Advanced Accounting), Sept 2025 — Q.1(b), AS 2 Valuation of Inventories._
Related questions
SR Ltd makes finished good MP from raw material RP. Cost of MP is ₹27 per unit (material ₹SR Ltd makes finished good MP from raw material RP. Cost of MP is ₹27 per unit (material ₹Under AS 2, net realisable value (NRV) is best described as which of the following?Under AS 2, which of the following is excluded from the cost of inventories?SR Ltd's fixed production overhead is ₹3,15,000 and its normal capacity is 45,000 units. WUnder AS 2, fixed production overheads are allocated to units of production on the basis oSR Ltd makes finished good MP from raw material RP. Cost of MP is ₹27 per unit (material ₹SR Ltd makes finished good MP from raw material RP. Cost of MP is ₹27 per unit (material ₹