Homework Answers
Steps to value inventory as per LCNRV
Here we will take middle of replacement cost, NRV(Upper Limit) and NRV less normal profit (lower limit ) that will be market value
Now we will compare market value with cost per unit and whichever is lower at that inventory will be valued
| Quantity in Units | Original Cost | Replacement Cost | NRV(Upper Limit) | Net Realizable Value less Normal profit(lower Limit) | Market value = Middle of Three Upper limit, Lower limit and replacement cost | Lower of market value or cost | Total Cost of Inventory Units | |
| A | 500 | $ 0.65 | $ 0.45 | $ 0.90 | $ 0.60 | $ 0.60 | $ 0.60 | $ 300.00 |
| B | 450 | $ 0.45 | $ 0.40 | $ 0.90 | $ 0.55 | $ 0.55 | $ 0.45 | $ 202.50 |
| C | 330 | $ 0.70 | $ 0.75 | $ 0.65 | $ 0.60 | $ 0.65 | $ 0.65 | $ 214.50 |
| D | 200 | $ 0.75 | $ 0.65 | $ 0.65 | $ 0.50 | $ 0.65 | $ 0.65 | $ 130.00 |
| E | 925 | $ 0.90 | $ 0.85 | $ 0.90 | $ 0.60 | $ 0.85 | $ 0.85 | $ 786.25 |
| Total Inventory at LCM Value | $ 1,633.25 | |||||||
Answer a. LCM ending inventory value using the itemized method is $1633.25
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