A company's normal selling price for its product is $30 per unit. However, due to market competition, the selling price has fallen to $25 per unit. This company's current inventory consists of 300 units purchased at $26 per unit. Replacement cost has fallen to $23 per unit. Calculate the value of this company's inventory at the lower of cost or market.

Question

Business

Janessa Levine

29 August, 19:16

A company's normal selling price for its product is $30 per unit. However, due to market competition, the selling price has fallen to $25 per unit. This company's current inventory consists of 300 units purchased at $26 per unit. Replacement cost has fallen to $23 per unit. Calculate the value of this company's inventory at the lower of cost or market.

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Answers (1)

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Gordon Kelley · Answer 1

value of this company's inventory at the lower of cost or market is $6,900

Explanation:

given data

selling price = $30 per unit

selling price fall = $25 per unit

current inventory consists = 300 units

purchased = $26 per unit

Replacement cost fall = $23 per unit

solution

As we know Under Cost or Market Price here lower price is Net realizable value is

lower price is Net realizable value = $23

so that value of company's inventory at the lower of cost will be

value of company's inventory = lower price is Net realizable value * Units in the inventory ... 1

put here value and we get

value of company's inventory = $23 * 300

value of company's inventory = $6,900