Ross Electronics has one product in its ending inventory. Per unit data consist of the following: cost, $32; replacement cost, $30; selling price, $42; selling costs, $8. The normal profit is 20% of selling price. What unit value should Ross use when applying the lower of cost or market (LCM) rule to ending inventory?

Question

Business

Yusuf Kim

13 April, 08:11

Ross Electronics has one product in its ending inventory. Per unit data consist of the following: cost, $32; replacement cost, $30; selling price, $42; selling costs, $8. The normal profit is 20% of selling price. What unit value should Ross use when applying the lower of cost or market (LCM) rule to ending inventory?

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Answers (1)

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Braden Huang · Answer 1

The unit price should be $25.6

Explanation:

Net realization value = selling price - selling cost

= $42 - $8

= $34

Profit margin = 20% of selling price

= 0.2 * $42

= $8.4

NRV - profit margin:

= $34 - $8.4

= $25.6

Since we don't have replacement cost in the question. Hence, the market value is lower of (NRV, NRV-Profit) = $25.6

The unit price should be $25.6