Why this is mistaken
Identify the inventory method first. Build NRV from a supported selling price less applicable completion, disposal, and transportation costs. Use direct NRV for the in-scope ordinary population. Constrain replacement cost between the ceiling and floor for LIFO or retail-method inventory.
Where to watch
When this mistake may appear
- Use MIN(cost, NRV) for every SKU.
- Market always means replacement cost.
- List price is NRV.
Check your work
Your work may contain this mistake if:
- Skips the cost-method route, omits NRV deductions, or uses replacement cost without the ceiling and floor.