A company has the following per unit original costs and market values for its inventory.Lower of cost or market is applied to individual items. Part A: 50 units with a cost of $5,and replacement cost of $4.50
Part B: 75 units with a cost of $6,and replacement cost of $6.50
Part C: 160 units with a cost of $3,and replacement cost of $2.50
Under the lower of cost or market method,the total value of this company's ending inventory is:

A) $1,180.00.
B) $1,075.00.
C) $1,112.50.
D) $1,217.50.
E) $1,137.50.

Question

william biggs · Accepted Answer

Final Answer : B, Explanation :  For Part A, the market value is below the cost, so the inventory is written down to $4.50 per unit, resulting in a total value of $225 ($4.50 x 50).For Part B, the cost is below the market value, so the inventory is valued at cost, resulting in a total value of $450 ($6 x 75).For Part C, the market value is below the cost, so the inventory is written down to $2.50 per unit, resulting in a total value of $400 ($2.50 x 160).The total value of the ending inventory is $1,075 ($225 + $450 + $400). Therefore, the correct answer is B.

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