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Lower of Cost or Market

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M. Corporation has two products in its ending inventory, each accounted for at the lower of cost or market. A profit margin of 30% on selling price is considered normal for each product. Specific data with respect to each product follows:
Product #1 Product #2
Historical cost $40.00 $ 70.00
Replacement cost 45.00 54.00
Estimated cost to dispose 10.00 26.00
Estimated selling price 80.00 130.00

In pricing its ending inventory using the lower-of-cost-or-market, what unit values should Marr use for products #1 and #2, respectively?

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Solution Summary

The solution explains the unit values to use under lower of cost or market value for inventory.

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The rule in lower of cost or market (replacement cost) is to use lower of cost or market provided market should not be higher net realizable value (selling price less the ...

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