Question

A company’s normal selling price for its product is $30 per unit. However, due to market competition, the selling price has fallen to $25 per unit. This company's current FIFO inventory consists of 300 units purchased at $26 per unit. Net realizable value has fallen to $23 per unit. Calculate the value of this company's inventory at the lower of cost or market.

Answer 1

Answer:

$6,900

Explanation:

Given:

Company’s normal selling price for its product = $30 per unit

current FIFO inventory = 300 units

Purchasing cost of the inventory = $26 per unit

Selling price = $25 per unit

Net realizable value = $23 per unit

Now,

Under Cost or Market Price

The lower price is Net realizable value i.e $23

Hence,

The value of this company's inventory at the lower of cost or market will be

= $23 × Units in the inventory

= $23 × 300

= $6,900