Konan, Inc. uses the lower of cost or market method to determine inventory value. The following information pertains to the ending inventory:
$\begin{array}{lccccc}\text { Item } & \text { Cost } & \begin{array}{c}
\text { Replacement } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Selling } \
\text { Price }
\end{array} & \begin{array}{c}
\text { Cost of } \
\text { Completion }
\end{array} & \begin{array}{c}
\text { Normal } \
\text { Profit }
\end{array}\
\text { L-19 } & \$ 40 & \$ 38 & \$ 50 & \$ 2 & \$ 11 \
\text { M-23 } & 52 & 40 & 60 & 4 & 14 \
\text { N-05 } & 20 & 24 & 30 & 2 & 6
\end{array}$
-The maximum limit for market value of product L-19 is
A)$37.
B)$38.
C)$48.
D)$50.

Question

Quizplus · Accepted Answer

The maximum limit for market value under the lower of cost or market method is the net realizable value (NRV), which is calculated as the selling price minus the cost of completion. For product L-19, the selling price is $50 and the cost of completion is $2, making the NRV $48. This is the ceiling or maximum limit for the market value.

Konan, Inc -The Maximum Limit for Market Value of Product L-19 Is