when a company buys inventory it may incur extra costs to store or prepare the goods for sale the costs associated with storing inventory are referred to as the carrying cost of inventory assume for example a retailer purchases large pieces of expensive furniture as inventory and the company has to build a display case and hire a contractor to carefully move the furniture to the buyer s home these extra costs are subtracted from the selling price to compute the nrv 
cost accounting is a heuristic method used by some firms to account internally for costs associated with various business activities nrv is used to account for such costs when two products are produced together in a joint costing system until the products reach a split off point after the split off point their production separates and in turn each product s cost is accounted for separately after the split off point nrv is used to allocate previous joint costs to each of the products this allows managers to calculate the total cost and assign a sale price to each product individually it also allows managers to better plan and understand whether to stop production at the split off point or if it is more advantageous to continue processing the raw material be aware the nrv can be used for external reporting inventory and accounts receivable purposes as well as internal reporting cost accounting purposes 