Question

A company's normal selling price for its product is $20 per unit. However, due to market competition, the selling price has fallen to $15 per unit. This company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has fallen to $13 per unit. Calculate the value of this company's inventory at the lower of cost or market.A) $2,550.
B) $2,600.
C) $2,700.
D) $3,000.
E) $3,200.

Answer 1

Answer:

value of company inventory = $2600

so correct answer is B) $2,600

Explanation:

given data

normal selling price = $20

selling price fallen = $15

current inventory = 200 units

purchased =  $16 per unit

cost fallen = $13 per unit

solution

we know that context inventory meaning is that inventory is reported the lower cost or the replacement cost

here lower is replacement cost = $13

so value of company inventory at lower of cost will be

value of company inventory = 200 units × $13

value of company inventory = $2600

so correct answer is B) $2,600