Part B
Em Company maintains an inventory of 5 products. Per-unit information on each is provided in the table below:
|
Product |
Historical Cost |
Replacement Cost |
Selling Price |
Costs of Disposal |
Normal Profit |
||||
|
A |
7.00 |
4.00 |
9.00 |
1.00 |
2.00 |
||||
|
B |
3.00 |
4.00 |
8.00 |
1.00 |
2.00 |
||||
|
C |
6.00 |
8.00 |
9.00 |
2.00 |
3.00 |
||||
|
D |
9.00 |
8.00 |
11.00 |
4.00 |
3.00 |
||||
|
E |
$6.00 |
$5.00 |
$9.00 |
$2.00 |
$3.00 |
Required:
Using the lower-of-cost-or-market method, determine the per-unit amount at which each product should be carried in Em’s ending inventory.
Ceiling = Selling price - Costs of disposal
Floor = Ceiling - Normal profit
Market is the middle value of ceiling, floor and replacement cost
| Product | Historical cost | Replacement cost | Ceiling | Floor | Market | Lower of cost or market |
| A | $7 | $4 | $8 | $6 | $6 | $6 |
| B | $3 | $4 | $7 | $5 | $5 | $3 |
| C | $6 | $8 | $7 | $4 | $7 | $6 |
| D | $9 | $8 | $7 | $4 | $7 | $7 |
| E | $6 | $5 | $7 | $4 | $5 | $5 |
Part B Em Company maintains an inventory of 5 products. Per-unit information on each is provided...