Question

A companys normal selling price for its product is $24 per unit. however, due to market competition, the selling price has fallen to $19 per unit. this company's current inventory consists of 160 units purchased at $20 per unit. replacement cost has fallen to $17 per unit. calculate the value of this company's inventory at the lower of cost or market.

Answer 1

The value of the company’s inventory at the lower cost or market is simply the product of the replacement cost and the number of units. Therefore,

Inventory at the lower cost = ($17 / unit) (160 units)

Inventory at the lower cost = $2,720