Always Accounting standards

@ Shruti 

AS2.24 Materials and other supplies held for use in the production of

inventories are not written down below cost if the finished products in

which they will be incorporated are expected to be sold at or above cost. So here replacement cost is the NRV ie, Selling/market price minus all other expenses

However, when there has been a decline in the price of materials and it is

estimated that the cost of the finished products will exceed net realisable

value, the materials are written down to net realisable value. In such

circumstances, the replacement cost of the materials may be the

best available measure of their net realisable value. 

This makes NRV is Selling price minus costs to sell. 

Net realisable value is the estimated selling price in the ordinary

course of business less the estimated costs of completion and

the estimated costs necessary to make the sale. As2 inventories right? The criteria is the same 

I don't hold examples, your material will have it. 

The closing inventory is always valued at lower of cost or NRV. The standard mentions about writing down of inventory cost to it's NRV under special circumstances like damaged goods etc. In your case since Replacement cost is mentioned, yes you must choose 600. If replacement cost is not mentioned, you have to choose 600 because NRV is lower than the Cost. 

Oops you have this replacement cost classification because there is adecline in the raw material after you purchased it making the finished goods cost more. Hence the cost is written down to 600. Writing down to NRV, there are different classification for various circumstances. If you can go though mca as2 you can clarify your doubts.

I can quote an easy example 

1jan if you purchased material for 100 and it is 50 by end of month, in calculating cost of inventory you will use 100, while calculating NRV you'll use 50. If selling costs are 10 and conversion costs are 40. 

Purchase cost minus conversion cost = 100-50=50. Did you observe here? Cost is more than NRV and hence it must be written down to NRV. 

Market price minus selling costs = 50-10= 40. We must write down to 40. Supposing if month ending inventory rises to 200, then 

Purchase price minus conversion cost = 100-200

Market price minus selling costs = 200-19

So replacement cost terminology is used only during calculating NRV. The change in prices is called as replacement cost.