Day: September 22, 2026

Management should compare the cost and net realisable value for each item of inventory.

Which ONE of the following circumstances could result in net realisable value being HIGHER than cost?

Select ONE answer:

1. An increase in selling price
2. An increase in the cost of raw materials which cannot be passed on to the customer
3. Errors in production
4. An increase in production overheads

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – An increase in selling price increases net realisable value.
2. Not correct
3. Not correct
4. Not correct

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