Question

The inventory of Royal Decking consisted of five products. Information about the December 31, 2018, inventory is as follows:

	Per Unit
Product	Cost			Selling Price
A	$	140		$	160
B		180			200
C		140			180
D		100			150
E		60			80

Costs to sell consist of a sales commission equal to 10% of selling price and shipping costs equal to 5% of cost.

Required:
What unit value should Royal Decking use for each of its products when applying the lower of cost or net realizable value (LCNRV) rule to units of ending inventory?

Answer 1

Product	Cost Per Unit	Selling Price	Cost to sell	NRV = SP - Cost to sell	Inventory Value = [Lower of {Cost} and [NRV]
A	$140.00	$160.00	$23.00	$137.00	$137.00
B	$180.00	$200.00	$29.00	$171.00	$171.00
C	$140.00	$180.00	$25.00	$155.00	$140.00
D	$100.00	$150.00	$20.00	$130.00	$100.00
E	$60.00	$80.00	$11.00	$69.00	$60.00

OR

	(a)	(b)	(c)	(d)
Product	Selling Price	Sales Commission (a) x 10%	Cost Per Unit	Shipping Cost (c) x 5%	NRV = (a - b- d)	Inventory Value = [Lower of {Cost} and [NRV]
A	$160.00	$16.00	$140.00	$7.00	$137.00	$137.00
B	$200.00	$20.00	$180.00	$9.00	$171.00	$171.00
C	$180.00	$18.00	$140.00	$7.00	$155.00	$140.00
D	$150.00	$15.00	$100.00	$5.00	$130.00	$100.00
E	$80.00	$8.00	$60.00	$3.00	$69.00	$60.00

Cost to Sell = 10% of selling price + 5% of Cost