Herman Company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows:
Product 1 | Product 2 | Product 3 | |||||||||
Cost | $ | 32 | $ | 102 | $ | 62 | |||||
Replacement cost | 30 | 97 | 52 | ||||||||
Selling price | 52 | 132 | 79 | ||||||||
Selling costs | 4 | 49 | 9 | ||||||||
Normal profit | 17 | 42 | 24 | ||||||||
Required:
What unit values should Herman use for each of its products when applying the lower of cost or market (LCM) rule to ending inventory?
Product | Cost | RC | NRV | NRV-NP | Market | PUIV |
1 | 32 | 30 | 48 | 31 | 31 | 31 |
2 | 102 | 97 | 83 | 41 | 83 | 83 |
3 | 62 | 52 | 70 | 46 | 52 | 52 |
NRV = Selling Price - Selling Cost
NRV-NP = NRV - Normal Profit
Market = Middle Value between RC, NRV, NRV-NP
Per Unit Inventory Value (PUIV) = Lower value between Cost, Market
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