Question

Presented below is information related to Marigold Inc.’s inventory, assuming Marigold uses lower-of-LIFO cost-or-market.

(per unit)		Skis		Boots		Parkas
Historical cost		$205.20		$114.48		$57.24
Selling price		228.96		156.60		79.65
Cost to distribute		20.52		8.64		2.70
Current replacement cost		219.24		113.40		55.08
Normal profit margin		34.56		31.32		22.95

Determine the following:

(a) The two limits to market value (i.e., the ceiling and the floor) that should be used in the lower-of-cost-or-market computation for skis. (Round answers to 2 decimal places, e.g. 52.75.)

Ceiling Limit		$enter a dollar amount
Floor Limit		$enter a dollar amount

(b) The amount that should be used in the lower-of-cost-or-market comparison of boots. (Round answers to 2 decimal places, e.g. 52.75.)

$enter the cost amount that should be used in the lower-of-cost-or-market comparison of boots

(c) The amount that should be used to value parkas on the basis of the lower-of-cost-or-market. (Round answers to 2 decimal places, e.g. 52.75.)

$enter the market amount that should be used to value parkas on the basis of the lower-of-cost-or-market

Answer 1

Answers:

a.)

Skis
Ceiling:
Selling price	$228.96
Less: Cost to distribute	$20.52
Ceiling	$208.44
Floor
NRV	$208.44
Less: Normal profit margin	$34.56
Floor	$173.88

b.)

boots
Ceiling:
Selling price	$156.60
Less: Cost to istribute	$8.64
Ceiling	$147.96
Floor
NRV	$147.96
Less: Normal profit margin	$31.32
Floor	$116.64

.

Cost	Replacement	ceiling	Floor	MV	LCM
$114.48	$113.40	$147.96	$116.64	$116.64	$114.48

Answer : $114.48

.

c,)

Parkas:
Ceiling:
Selling price	$79.65
Less: Cost to istribute	$2.70
Ceiling	$76.95
Floor
NRV	$76.95
Less: Normal profit margin	$22.95
Floor	$54

.

Cost	Replacement	ceiling	Floor	MV	LCM
$57.24	$55.08	$76.95	$54	$55.08	$55.08

Answer: $ 55.08