The chocolate maker Cacaoria has built up an inventory of 15,000 units kg of cocoa beans, paid 9 per kg. An exceptional harvest drives prices down: at the year-end, these beans could be bought back at 7 per kg. The fall in cocoa prices passes through to the selling prices of gift boxes: the expected cost of a box, which uses 2 units kg of beans, is 48 while its net realisable value is now only 44. After analysis, management retains replacement cost as the best available measure of the net realisable value of the beans. What write-down should be recognised on the beans, and at what carrying amount?
- Cocoa beans in inventory (kg)
- 15,000
- Cost of purchase per kg
- 9
- Replacement cost per kg at the year-end
- 7
- Expected cost of a box
- 48
- Net realisable value of a box
- 44
- Beans used per box (kg)
- 2