The constant gross-margin percentage NRV method is the only method whereby products can receive negative allocations.

Question

Quizplus · Accepted Answer

The constant gross-margin percentage NRV method is unique in the sense that it allows for negative allocations, which means that some products may be assigned a cost that is higher than their selling price. This can happen when the net realizable value (NRV) of a product falls below its cost, leading to a negative margin. The other cost allocation methods, such as the FIFO or average cost methods, do not permit negative allocations.

The Constant Gross-Margin Percentage NRV Method Is the Only Method