Question

Carla Vista Company sells product 2005WSC for $130 per unit. The cost of one unit of 2005WSC is $127, and the replacement cost is $126. The estimated cost to dispose of a unit is $6, and the normal profit is 40% of selling price. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-market?

Answer 1

Answer:

Product 2005WSC  should be reported at $127

Explanation:

Using the lower-of-cost-or-market, Carla Vista Company reports its Inventory at the lower of cost and net realizable value at the end of its financial period.

Cost per unit of 2005WSC is $ 127 (given)

Net realizable value per unit of 2005WSC is :

Selling Price ( $127 × 1.40)                   $177.80

Less Estimated Cost to Sell                 ($6.00)

Net realizable value                           $ 171.80

Conclusion :

Therefore, the lower is Cost at $127

Thus product 2005WSC  is measured at $127