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Computing Lower of Cost or Market

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Data for Grace Company relative to the 12/31/09 inventory record

Units in Original Cost Total Original Current Unit
Item Inventory Per Unit Cost Replacement Cost

A 2,000 $0.89 $1,780 $0.88
B 2,000 $1.30 $2,600 $1.15
C 2,000 $1.50 $3,000 $0.85
D 2,000 $1.55 $3,100 $1.65
E 2,000 $1.80 $3,600 $1.50
________ __________
Total 10,000 $14,080

Complete the 5 Columns below

ANALYSIS:
Unit Unit Unit Unit Appropriate
Upper Lower Inventory Inventory
Limit Limit Designated Value (Valuation)
Item (Ceiling) (Floor) Market LCM (Total $)
____ ________ _______ __________ ________ _________
A
B
C
D
E _____________

Total ______________

Additional Information
Selling price is $2.00/unit for all items. Cost-to complete/Disposal cost amount to 20% of selling price and the normal profit is 35% of selling price for every item sold.

Solution Summary

Given facts concerning several inventory items, this solution illustrates how to value each, and then the entire inventory, at lower of cost or market.

$2.19