Question

Company X had the following information: inventory at cost of $570, selling value of inventory of $590, inventory cost of completion of $30, inventory cost of distribution of $50, normal profit margin of $35, and inventory replacement cost of $550. What is the market value amount to be used in the determination of the inventory’s market value in the lower-of-cost-or-market method of inventory?

Group of answer choices below

$510

$550

$475

$570

Answer 1

Correct answer-------------$510

Working

Cost	Replacement cost	NRV	NRV-NP	Market	Per unit Inventory Value
$ 570.00	$                 550.00	$ 510.00	$ 475.00	$ 510.00	$                 510.00

.

.

If we want to value inventory on the basis of lower of cost or market value then we have to first calculate market value.
To calculate market value an easy method is used in this question. We will take the middle value of the given below values to ascertain market value.
Replacement value	NRV	NRV minus Normal Profits