The Garrett Corporation uses the lower-of-cost-or-market method to value inventory. Data regarding the items in work-in-process inventory are presented below.

The value for cost to be used in the lower-of-cost-or-market comparison for the markers is

Question

The Garrett Corporation uses the lower-of-cost-or-market method to value inventory. Data regarding the items in work-in-process inventory are presented below.

The value for cost to be used in the lower-of-cost-or-market comparison for the markers is

Quizplus · Accepted Answer

The lower-of-cost-or-market method compares the original cost of an inventory item to its current market value, and the lower value should be used to value the inventory. For the markers, the cost is $24,000 ($20,000 for direct materials and $4,000 for direct labor), and the market value is $23,400, which is the replacement cost. Therefore, the value for cost to be used in the lower-of-cost-or-market comparison for the markers is $23,400.

The Garrett Corporation Uses the Lower-Of-Cost-Or-Market Method to Value Inventory