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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. What is the value of the closing inventory of finished goods MP?
A₹1,13,400
B₹1,03,950
C₹84,000
D₹92,400
Answer & Solution
Correct answer: D. ₹92,400
1. MP is valued at the lower of cost ₹27 and NRV ₹22, i.e. ₹22 per unit.
2. Closing MP units = 4,200.
3. Value = 4,200 × ₹22 = ₹92,400.
_Source: ICAI BoS CA Intermediate Paper 1 (Advanced Accounting), Sept 2025 — Q.1(b), AS 2 Valuation of Inventories._
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