Fonderie Brésal holds 4,000 units kg of an alloy purchased at a cost of 25 per kg. At the year-end, the price of the alloy has collapsed: its replacement cost is 21 per kg. Each casting uses 5 units kg of alloy. The castings made from this alloy have an expected production cost of 310 per casting, for an estimated net realisable value of 290 per casting. Management considers, as a documented judgement, that replacement cost is the best available measure of the net realisable value of the alloy. Compute the write-down of the alloy and its carrying amount.
- Quantity of alloy (kg)
- 4,000
- Cost of the alloy per kg
- 25
- Replacement cost per kg
- 21
- Expected production cost of a casting
- 310
- Net realisable value of a casting
- 290
- Alloy used per casting (kg)
- 5