Sheridan Company sells product 2005WSC for $65 per unit. The cost of one unit of

Question

Sheridan Company sells product 2005WSC for $65 per unit. The cost of one unit of 2005WSC is $62, and the replacement cost is $61. The estimated cost to dispose of a unit is $6, and the normal profit is 40%. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-market?

$59.

Cullumber Company sells product 1976NLC for $26 per unit. The cost of one unit of 1976NLC is $25, and the replacement cost is $24. The estimated cost to dispose of a unit is $4, and the normal profit is 35%. At what amount per unit should product 1976NLC be reported, applying lower-of-cost-or-market?

Explanation / Answer

Answer:-

a. Sheridan Company sells product 2005WSC for $65 per unit. The cost of one unit of 2005WSC is $62, and the replacement cost is $61. The estimated cost to dispose of a unit is $6, and the normal profit is 40%. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-market?
Ans:-$ 59

Calculation:-

Cost is= $62

NRV= $65-$6=$59

RC=$61

Therefore LCM=$59

b. Cullumber Company sells product 1976NLC for $26 per unit. The cost of one unit of 1976NLC is $25, and the replacement cost is $24. The estimated cost to dispose of a unit is $4, and the normal profit is 35%. At what amount per unit should product 1976NLC be reported, applying lower-of-cost-or-market?

Answer:- $22

Calculation:-

Cost is= $25

NRV= $26-$4=$22

RC=$24

Therefore LCM=$22

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