Question

# A company normally sells its product for \$18 per unit. However, the selling price has fallen...

A company normally sells its product for \$18 per unit. However, the selling price has fallen to \$12 per unit. This company's current inventory consists of 300 units purchased at \$16 per unit. Replacement cost has now fallen to \$7 per unit. Calculate the value of this company's inventory at the lower of cost or market.

Given that the company's current inventory consists of 300 units.
Current selling price in market=\$12 per unit
Replacement cost=\$7 per unit

Value of inventory (considering the current selling price in market)=Selling price in market*Total units available in inventory
=\$12*300=\$3600

Value of inventory (considering replacement cost)=Replacement cost price*Total units available in inventory
=\$7*300=\$2100

Value of the company's inventory at the lower of cost (that is \$2100) or market(that is \$3600)=\$2100

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