Question

Han company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows: Product 1: Cost $40, Selling Price $100, Costs to Sell $6. Product 2: Cost $110, Selling Price $180, Costs to Sell $80. Product 3: Cost $70, Selling Price $130, Costs to Sell $30. What unit values should Han use for each of its products when applying the lower of cost or net realizable value (LCNRV) rule to ending inventory?

Answer 1

When applying the lower of cost or net realizable value (LCNRV) rule to ending inventory, Han company should use the lower of cost or net realizable value for each product. The unit values to be used are as follows: Product 1: $94, Product 2: $100, Product 3: $100.

Step-by-step explanation:

When applying the lower of cost or net realizable value (LCNRV) rule to ending inventory, Han company should use the lower of cost or net realizable value for each product. The net realizable value is the estimated selling price minus the costs to sell the product. The unit values to be used for each product are as follows:

• Product 1: Cost $40, Net Realizable Value $100 - $6 = $94
• Product 2: Cost $110, Net Realizable Value $180 - $80 = $100
• Product 3: Cost $70, Net Realizable Value $130 - $30 = $100