Replacement costs must fall between.
- NRV (net realized value) represents the upper
- NRV-NP (net realizable value less a normal profit margin) is the lower limit.
RC (Replacement costs) represents market, within the rang e.
Designated market value falls in the middle of replacement cost, net realizable value and net realizable value less a normal profit margin.
The designated market value is compared with cost, and the lower of the two is used to value inventory.