Question

The designated market value:a. is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin.b. should always be equal to net realizable value.c. may sometimes exceed net realizable value.d. should always be equal to net realizable value less a normal profit margin.

Answer 1

Answer:

a. is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin.

Explanation:

As we know that inventory will be recorded at cost or market value whichever is lower. But in the given case, the replacement cost would be recorded at higher values and lesser values. Higher values represent the Net realizable value whereas the lesser values represent the net realizable value less than the normal profit margin.

And if the replacement cost lies in this range than it represents the designated market value.  

Hence, option a is correct.