2). A hospital buys certain supplies for $50 each. The avergage markup is 100%. Additional selling costs are 25% of the total cost. What is the net realizable value?
3). Assume this same product has a current replacement cost of $40. What is the lowe cost or market?
Expert Answer
2) Net realizable value (NRV) = selling price – selling costs
where selling price = cost * (1 + markeup)
So, Net realiable value = (50+50*100%) – (50*25%) = $ 87.5
3) Floor for the market price (market floor) = NRV – normal profit = 87.5 – 50 = 37.5
Replacement Cost (RC) is
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