Question

Given the acquisition cost of product Z is $64, the net realizable value for product Z is $58, the normal profit for product Z is $5, and the market value (replacement cost) for product Z is $60, what is the proper per unit inventory price for product Z?
a. $64.
b. $60.
c. $53.
d. $58.

Answer 1

Answer:

option (d) $58

Explanation:

Data provided in the question:

Acquisition cost of product Z = $64

Net realizable value for product Z = $58

Normal profit for product Z = $5

Market value (replacement cost) for product Z = $60

Now,

Floor Net realizable value = Net realizable value - Normal profit

= $58 - $5

= $53

Proper per unit inventory price for product Z

= lower of [ cost , net reliable value ]

=  lower of [ $64 , $58 ]

= $58

Hence,

The answer is option (d) $58