Question

Zytex Diagnostics has just completed its physical inventory, as shown below. Calculate the lower of cost or market ending inventory using: Item by item method, and the major category method.

Category J	QTY	Cost	Market
Item 1	140	40	44
Item 2	240	80	78
Category K
Item 3	100	20	16
Item 4	50	30	32

Answer 1

Item by item method

Category J	QTY	Cost	Market	Lower of cost or market
Item 1	140	40	44	140*40 = 5600
Item 2	240	80	78	240*78 = 18720
Category K
Item 3	100	20	16	100*16 = 1600
Item 4	50	30	32	50*30 = 1500
Total				27420

Major category method

Category J	QTY	Cost	market
Item 1	140	140*40 = 5600	140*44 = 6160
Item 2	240	240*80 = 19200	240*78 = 18720
Total		24800	24880
Category K
Item 3	100	2000	1600
Item 4	50	1500	1600
Total		3500	3200

Total Value of inventory = 24800+3200 = 28000