Question

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

	Per Unit
Product	Cost			Selling Price
A	$	160		$	180
B		200			220
C		110			200
D		120			200
E		80			100

Costs to sell consist of a sales commission equal to 10% of selling price and shipping costs equal to 10% of cost.
 
Required:
What unit value should Royal Decking use for each of its products when applying the lower of cost or net realizable value (LCNRV) rule to units of ending inventory?

Answer 1

Product	Cost	NRV ( WNote 1)	Per Unit Inventory Value
A	$ 160	$ 146	$ 146
B	$ 200	$ 178	$ 178
C	$ 110	$ 169	$ 110
D	$ 120	$ 168	$ 120
E	$ 80	$ 82	$ 80

Per Unit Inventory Value = Lower of Cost or Net Realizable value (NRV)

W Note :-1 Calculation of Net Realizable value :-

	(1)	(2)	(3) = 10% of (2)	(4) = 10% of (1)	(5) = (2 - 3 -4)
Product	Cost	Selling Price	Sales Commission	Shipping Costs	NRV
A	$ 160	$ 180	$ 18	$ 16	$ 146
B	$ 200	$ 220	$ 22	$ 20	$ 178
C	$ 110	$ 200	$ 20	$ 11	$ 169
D	$ 120	$ 200	$ 20	$ 12	$ 168
E	$ 80	$ 100	$ 10	$ 8	$ 82