A company’s normal selling price for its product is $29 per unit. However, due t

Question

A company’s normal selling price for its product is $29 per unit. However, due to market competition, the selling price has fallen to $24 per unit. This company's current inventory consists of 290 units purchased at $25 per unit. Replacement cost has fallen to $22 per unit. Calculate the value of this company's inventory at the lower of cost or market.

A.) $6,960.

B.) $6,380.

C.) $6,480.

D.) $7,250.

E.) $6,330.

A company’s normal selling price for its product is $29 per unit. However, due to market competition, the selling price has fallen to $24 per unit. This company's current inventory consists of 290 units purchased at $25 per unit. Replacement cost has fallen to $22 per unit. Calculate the value of this company's inventory at the lower of cost or market.

Explanation / Answer

New selling price of the product is=$24 per unit

Cost price of the product will be the replacement price because the price which we have purcahsed is immaterial, The price at which now we can be purchased can be considered i;e replacement cost. so the new cost price will be=$22

Selling price of 290 units= 290*$24

=$6960

Cost price of 290 units=290*$22

=$6380

As the value of inventory should be lower of cost or market price, value of inventory will be$6380, So option B is correct.

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