Question 6 Item Quantity Unit Cost Replacement Cost/Unit Estimated Selling Price

Question

Question 6

Item

Quantity

Unit Cost

Replacement
Cost/Unit

Estimated Selling Price/Unit

Completion & Disposal Cost/Unit

Normal Profit Margin/Unit

Lower-of-Cost-or-Market
(Per unit basis)

Question 6

Fiedler Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2014.

Item

Quantity

Unit Cost

Replacement
Cost/Unit

Estimated Selling Price/Unit

Completion & Disposal Cost/Unit

Normal Profit Margin/Unit

A 1,300 $11.85 $13.27 $16.59 $2.37 $2.84 B 1,000 12.96 12.48 14.85 1.42 1.90 C 1,200 8.85 8.53 11.38 1.82 0.95 D 1,200 6.00 6.64 9.95 1.26 2.37 E 1,600 10.11 9.95 10.59 1.11 1.58
Greg Forda is an accounting clerk in the accounting department of Fiedler Co., and he cannot understand why the market value keeps changing from replacement cost to net realizable value to something that he cannot even figure out. Greg is very confused, and he is the one who records inventory purchases and calculates ending inventory. You are the manager of the department and an accountant.

Explanation / Answer

NEt realisable value=Selling price-disposal cost

NRV or cost whichever is lower

ITEM amount in $ A    $11.85 B $12.96 C $8.85 D $6 E $9.48(10.59-1.11)

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