Final answer:
The lower of cost or market (LCM) rule is applied to each product in Ripken Company's inventory, resulting in an ending inventory valuation based on the lowest value between cost and market price for helmets, bats, shoes, and uniforms.
Step-by-step explanation:
The lower of cost or market (LCM) approach requires reporting the lower value between the cost to produce or purchase inventory and its market value when preparing financial statements. For Ripken Company's ending inventory, we compare the cost and market price for each product and use the lower value to calculate the final inventory valuation.
To compute the LCM for each product, perform the following steps:
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- Helmets: Cost = $50, Market = $54, LCM = $50
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- Bats: Cost = $78, Market = $72, LCM = $72
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- Shoes: Cost = $95, Market = $91, LCM = $91
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- Uniforms: Cost = $36, Market = $36, LCM = $36
After calculating the LCM for each item, we multiply it by the number of units in the ending inventory to find the total LCM value for Ripken Company's ending inventory.
The total LCM value for ending inventory is calculated by multiplying the LCM of each product by the respective units. Helmets, bats, shoes, and uniforms would be valued at $1,100, $1,080, $3,276, and $1,440 respectively in the ending inventory based on the LCM rule.