Homework Answers
Cost price per unit = $32
Net realisable value = $30
Normal profit = $2
Replacement cost = $27
Net realisable value less normal profit=30-2=$28
Since current replacement cost is lower than net realisable value less a normal profit margin, hence net realisable value less normal profit margin will be considered as market value of inventory.
Hence inventory as per LCM = $28
Second option is correct option.
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