Given the acquisition cost of product ALPHA is $34, the net realizable value for

Question

Given the acquisition cost of product ALPHA is $34, the net realizable value for product(replacement cost) for product ALPHA is $29.50, what is the proper per unit inventory price for product ALPHA? a) 34 b) 31 c) 29.50 d) 33.50
I thought the answer was 33.50 because the historical cost is 34 and the net realizable value (ceiling) is 33.50. So I thought the lower cost would be 33.50. What am i doing wrong?? Given the acquisition cost of product ALPHA is $34, the net realizable value for product(replacement cost) for product ALPHA is $29.50, what is the proper per unit inventory price for product ALPHA? a) 34 b) 31 c) 29.50 d) 33.50
I thought the answer was 33.50 because the historical cost is 34 and the net realizable value (ceiling) is 33.50. So I thought the lower cost would be 33.50. What am i doing wrong?? a) 34 b) 31 c) 29.50 d) 33.50
I thought the answer was 33.50 because the historical cost is 34 and the net realizable value (ceiling) is 33.50. So I thought the lower cost would be 33.50. What am i doing wrong??

Explanation / Answer

b) 31

Explanation

Lower of Cost or Market, Cost and selling price difference will be high, then only we can use net realizable value(selling)

In this case,

Acquisition cost of product ALPHA is $34 net realizable value (ceiling) is 33.50. It is very near price, difference is 0.50.

so , This type of case, we have to use net realizable value (Selling ) - Profit

$33.50 - $2.50

=$31 This price is proper unit inventory price for product Alpha

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