Question

The inventory of Royal Decking consisted of five products. Information about the December 31, 2021. Inventory is as follows:

Answer 1

Answer:

Unit values are given below

Explanation:

The unit value Royal Decking should use for each of its products when applying the lower of cost or market (LCM) rule to units of ending inventory can be calculated as follows

Product  Cost   Replacement     NRV   NRV - NP  Market Inventory Value

A             $46             $41           $57.10   $40.60       $41            $41

B             $86             $76          $91.10   $64.60       $76            $76

C             $46             $61          $75.10   $53.60       $61            $46

D             $106           $76          $117.10  $83.10        $83.10       $83.10

E             $26             $34          $31.10   $22.10        $31.10         $26

Woking (NRV)

NRV = Selling price -Sales commission - Shipping cost

Product A ($66 - [$66*10%] - [$46*5%]) = $57.10

Product B ($106 - [$106*10%] - [$86*5%]) =$91.10

Product C ($86 - [$86*10%] - [$46*5%]) =$75.10

Product D ($136 - [$136*10%] - [$106*5%]) =$117.10

Product E ($36 - [$36*10%] - [$26*5%]) =$31.10

Working (NRV - NP )

Product A ($57.10 - [$66*25%]) = $40.60

Product B ($91.10 - [$106*25%]) = $64.60

Product C ($75.10 - [$86*25%]) = $53.60

Product D ($117.10 - [$136*25%]) = $83.10

Product E ($31.10 - [$36*25%]) = $22.10