Explain the Meaning of Net Realizable Value and When Raw

question 62

Essay

Explain the meaning of net realizable value and when raw materials, work in progress and finished goods inventories need to be written down.

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Definitions:

Price to Clear

Price to Clear is the market price at which the quantity of goods supplied is equal to the quantity of goods demanded, thereby clearing the market.

Profit Per Unit

The revenue obtained per unit of a product or service sold, minus the cost per unit.

Optimal Output

The level of production that generates the highest possible profit for a firm, taking into account costs and revenue.

Price to Clear

The market price at which the quantity supplied of a good matches the quantity demanded, leading to an equilibrium where there is no surplus or shortage.