Final answer:
The Net Realizable Value (NRV) is calculated by subtracting additional processing and selling costs from the ultimate sales value of a product. It represents the real value of unsold inventory and is essential for financial reporting.
Step-by-step explanation:
The Net Realizable Value (NRV) of a product is defined as the ultimate sales value of the inventory good, less additional processing and selling costs. It does not include profit margin or cost allocation. The NRV is used to assess the value of a product that has been produced but not yet sold. By focusing on the ultimate sales value and the costs necessary to make the sale, businesses can determine the NRV for accounting purposes. This figure is crucial for financial reporting as it reflects the real value of the inventory in terms of what can be realized from its sale after considering the necessary expenditures to sell the product.