Question

The inventory of Royal Decking consisted of five products. Information about the December 31, 2021, inventory...

The inventory of Royal Decking consisted of five products. Information about the December 31, 2021, inventory is as follows:

Per Unit
Product Cost Replacement Cost Selling Price
A $ 48 $ 43 $ 68
B 88 78 108
C 48 63 88
D 108 78 138
E 28 36 38


Selling costs consist of a sales commission equal to 10% of selling price and shipping costs equal to 5% of cost. The normal profit is 40% of selling price.

Required:
What unit value should Royal Decking use for each of its products when applying the lower of cost or market (LCM) rule to units of ending inventory? (Do not round intermediate calculations. Round final answers to 2 decimal places.)

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Answer #1
Product Unit selling price Sales commission ( 10% of selling price ) Shipping cost ( 5% of selling price ) Normal profit ( 40% of selling price ) Net realizable value (NRV) [ Unit selling price - sales commission - Shipping cost ] (A) NRV less normal profit (B) Replacement cost (C) Market value [ Middle of A,B & C ] Cost per unit Lower of cost or market (LCM)
A 68 6.8 3.4 27.2 57.8 30.6 43 43 48 43
B 108 10.8 5.4 43.2 91.8 48.6 78 78 88 78
C 88 8.8 4.4 35.2 74.8 39.6 63 63 48 48
D 138 13.8 6.9 55.2 117.3 62.1 78 78 108 78
E 38 3.8 1.9 15.2 32.3 17.1 36 32.3 28 28
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