Track which costs leave the warehouse
Identify the inventory cost formula for interchangeable goods. Under a simplified weighted-average example, a fabricator holds 100 tonnes costing €1,000 per tonne and adds another 100 tonnes at €800 before any sale. The pooled cost is €900 per tonne. If it then sells 100 tonnes at €950, it records a gross margin of €5,000 before other costs. Under first-in, first-out, the same sale would use €1,000 per tonne and show a €5,000 loss. Neither accounting choice changes the cash already paid for the metal.
Check the selling value separately
For finished goods still on hand, suppose the expected selling price is now €870 per tonne and costs necessary to sell are €20. Net realisable value in this simplified case is €850. Against a remaining weighted-average cost of €900, this implies a €50 write-down per tonne. The assessment uses the relevant expected sale, not automatically the exchange quote for raw metal. Grade, contractual terms and further completion costs can make the two materially different.
Distinguish timing from exposure
Read raw materials, work in progress and finished goods separately. Compare inventory volumes and cost layers with sales contracts and any hedges before explaining a margin recovery as pricing power. This example concerns manufactured inventory under ordinary cost rules; it should not be applied mechanically to commodity broker-traders using a different measurement basis. Even a correctly recognised write-down does not tell an analyst when the customer will pay.
Practical check
Build a tonnes-and-cost bridge, then calculate net realisable value for the remaining finished stock using its actual route to sale.