The lower bound for the LCM is the net realizable value minus a normal profit margin. Are we accounting for the opportunity cost of carrying that inventory by deducting the normal profit margin from the net realizable value?
The Net realizable value is the price at which you can sell a good in the market. I think you just take it literally, no opportunity cost
I am reporting from Schweser video work book. Vol 1 page 321. When you are considering the market value of an inventory: It cannot be more than the net realizable value & It cannot be less than the net realizable value minus a normal profit margin. I don’t understand why we set a lower bound for the market value of the inventory.
You set lower an upper and lower bound to give a range to the stock valuation. Otherwise it would be too discretionary.