Question

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

	Per Unit
Product	Cost			Replacement Cost			Selling Price
A	$	60		$	55		$	80
B		100			90			120
C		60			75			100
D		120			90			150
E		40			48			50

Selling costs consist of a sales commission equal to 10% of selling price and shipping costs equal to 5% of cost. The normal profit is 20% of selling price.
 
Required:
What unit value should Royal Decking use for each of its products when applying the lower of cost or market (LCM) rule to units of ending inventory? (Do not round intermediate calculations. Round final answers to 2 decimal places.)

Answer 1

Product	Cost	Replacement Cost	Selling Price	Sales Commission	Shipping Costs	NRV	Normal Profit	NRV -NP	Market	Per Unit Inventory Value
A	$    60.00	$             55.00	$    80.00	$              8.00	$       3.00	$    69.00	$    16.00	$    53.00	$    55.00	$      55.00
B	$ 100.00	$             90.00	$ 120.00	$           12.00	$       5.00	$ 103.00	$    24.00	$    79.00	$    90.00	$      90.00
C	$    60.00	$             75.00	$ 100.00	$           10.00	$       3.00	$    87.00	$    20.00	$    67.00	$    75.00	$      60.00
D	$ 120.00	$             90.00	$ 150.00	$           15.00	$       6.00	$ 129.00	$    30.00	$    99.00	$    99.00	$      99.00
E	$    40.00	$             48.00	$    50.00	$              5.00	$       2.00	$    43.00	$    10.00	$    33.00	$    43.00	$      40.00

Notes:

1. Under U.S. GAAP, the term market, as defined in ASC 330-10-20, states that "market" gen­er­ally means current re­place­ment cost, except that this re­place­ment cost should not (1) exceed net re­al­iz­able value or (2) be lower than net re­al­iz­able value less a normal profit margin.