Question

A company's normal selling price for its product is $23 per unit. However, due to market competition, the selling price has fallen to $18 per unit. This company's current inventory consists of 170 units purchased at $19 per unit. Replacement cost has fallen to $16 per unit.
Calculate the value of this company's inventory at the lower of cost or market.

Answer 1

Answer:

$2.720

Explanation:

Under the inventory at the lower of cost or market method, we value inventory by taking the lowest value, either market, or cost. In this case, the cost, or replacement cost, is lower than the market value, so the value of the inventory will be found by multiplying the units by the replacement cost:

170 units x $16 per unit  = $2.720