A company has the following per unit original costs and replacement costs for its inventory. LCM is applied to individual items. Part A: 50 units with a cost of $5, and replacement cost of $4.50 Part B: 75 units with a cost of $6, and replacement cost of $6.50 Part C: 160 units with a cost of $3, and replacement cost of $2.50
Under the lower of cost or market method, the total value of this company's ending inventory is:
A) $1,112.50.
B) $1,217.50.
C) $1,180.00.
D) $1,075.00.
E) $1,137.50.

Question

Quizplus · Accepted Answer

The LCM rule requires valuing inventory at the lower of cost or market. For Part A, use $4.50 (lower than $5), for Part B, use $6 (lower than $6.50), and for Part C, use $2.50 (lower than $3). Total value = (50 units * $4.50) + (75 units * $6) + (160 units * $2.50) = $1,075.00.

A Company Has the Following Per Unit Original Costs and Replacement