Purchase Solution

# 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 ______________

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.

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