Question

Cost Net realizable value Net realizable value less normal profit Market replacement cost 1 $6.90 9.15 8.15 7.00 2 $11.45 9.95 9.20 10.05 3 $11.65 13.30 11.20 13.60 4 $6.90 5.10 3.80 4.85 5 $8.05 6.95 6.25 4.50 Determine the proper unit inventory price in the above independent cases by applying the lower of cost or market rule. Case 1 s Case 2 Case 3 Case 4 Case 5

Answer 1

SOLUTION:
Cases	Case 1	Case 2	Case 3	Case 4	Case 5
Cost	$6.90	$11.45	$11.65	$6.90	$8.05
Net Realizable Value	$9.15	$9.95	$13.30	$5.10	$6.95
Net Realizable Value less Normal Profit	$8.15	$9.20	$11.20	$3.80	$6.25
Market Replacement cost	$7.00	$10.05	$13.60	$5.85	$4.50
Lower of Cost or market Value	$6.90	$9.20	$11.20	$3.80	$4.50
Case 1	$6.90	Cost is lowest
Case 2	$9.20	Net Realizable Value less Normal Profit is lowest
Case 3	$11.20	Net Realizable Value less Normal Profit is lowest
Case 4	$3.80	Net Realizable Value less Normal Profit is lowest
Case 5	$4.50	Market Replacement cost is lowest