Question

Herman Company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows: Product 1 $37 35 Product 2 Product 3 Cost $107 102 $67 57 72 Replacement cost Selling price Selling costs Normal profit 57 137 30 8 22 47 29 t Required: What unit values should Herman use for each of its products when applying the lower of cost or market (LCM) rule to ending inventory? nces Per Unit Inventory Value Replacement Product Cost NRV NRV-NP Market cost 1 37 $ 53 107 2 107 3 67 64

Answer 1

Herman Company Product Cost Replacement Cost Ceiling NRV 53 Per unit Inventory Value Floor NRV - NP Designated Market Value 31 60 102 Cost 37 37 35 107 107 107 102 102 57 67 35 57 67 57 NRV = Selling price less disposal costs. NRV - NP = NRV less normal profit margin. Designated Market Value = [Middle value of (RC), (NRV) & (NRV - NP)] Per Unit Inventory Value = (Lower of (Designated Market Value) and (Cost)]