Question

The following information pertains to one item of inventory of the Simon Company: Per unit Cost $ 200 Replacement cost 170 Selling price 190 Disposal costs 10 Normal profit margin 30 Using the lower of cost or market, this item should be valued at:__________.
A. $150
B. $200
C. $170
D. $190

Answer 1

Answer:

Option "C" is the correct answer to the following question.

Explanation:

Given:

Per unit cost = $200

Replacement cost = $170

Selling price = $190

Disposal costs = $10

Normal profit margin = $30

Computation of item valued using lower of cost or market:

Lower of cost or market :

Lower of cost or market = Lower of [Per unit cost or Replacement cost or Market cost]

Lower of cost or market = Lower of [$200 or $170 or {$190-($30-$10)}]

Lower of cost or market = Lower of [$200 or $170 or {$190-($20)}]

Lower of cost or market = Lower of [$200 or $170 or $170]

Item valued using lower of cost or market = $170