Exercise 9-3 Michael Bolton Company follows the practice of pricing its inventor

Question

Exercise 9-3

Michael Bolton Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis.

Item No.

Quantity

Cost per Unit

Cost to Replace

Estimated Selling Price

Cost of Completion and Disposal

Normal Profit

From the information above, determine the amount of Bolton Company inventory.

_______________?

Item No.

Quantity

Cost per Unit

Cost to Replace

Estimated Selling Price

Cost of Completion and Disposal

Normal Profit

1320 1,300 $5.60 $5.25 $7.88 $0.61 $2.19 1333 1,000 4.73 4.03 6.13 0.88 0.88 1426 900 7.88 6.48 8.75 0.70 1.75 1437 1,100 6.30 5.43 5.60 0.44 1.58 1510 800 3.94 3.50 5.69 1.40 1.05 1522 600 5.25 4.73 6.65 0.70 0.88 1573 3,100 3.15 2.80 4.38 1.31 0.88 1626 1,100 8.23 9.10 10.50 0.88 1.75

Explanation / Answer

Note:

Celing Price = NRV = Estimated selling price - cost of completion and disposal

Floor Price = NRV - normal profit

Rule :

Here's a recap on how to determine the market amount used in the lower of cost or market rule:

lower of cost or market (LCM) rule: LCM is the lower of cost or replacement cost, with the replacement cost being no higher than NRV and no lower than NRV minus the normal profit.

Item No Quantity Cost per unit Cost to replace estimat-ed selling price cost of complet-ion and disposal Net Realizable Value - Celing Normal profit NRV - normal profit (Floor) Market Value Valur of inventory (Lower of cost or market) Cost of itemwise inventory 1320 1300         5.60       5.25        7.88         0.61             7.27       2.19       5.08       5.25              5.25     6,825.00 1333 1000         4.73       4.03        6.13         0.88             5.25       0.88       4.37       4.37              4.37     4,370.00 1426 900         7.88       6.48        8.75         0.70             8.05       1.75       6.30       6.48              6.48     5,832.00 1437 1100         6.30       5.43        5.60         0.44             5.16       1.58       3.58       5.16              5.16     5,676.00 1510 800         3.94       3.50        5.69         1.40             4.29       1.05       3.24       3.50              3.50     2,800.00 1522 600         5.25       4.73        6.65         0.70             5.95       0.88       5.07       4.73              4.73     2,838.00 1573 3100         3.15       2.80        4.38         1.31             3.07       0.88       2.19       2.80              2.80     8,680.00 1626 1100         8.23       9.10     10.50         0.88             9.62       1.75       7.87       9.10              8.23     9,053.00 Total Cost of Inventory 46,074.00

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