Question

Wilson Animal Feeds has developed the following data to calculate lower of cost or market for its products.

Selling
Price Cost
Large animals:
Cattle $320 $160
Horse 400 400
Small animals:
Cat $360 $320
Dog 120 90
Exotic pets:
Ferret $140 $112
Iguana 70 48

The costs to sell are 20% of selling price.

Required:
Determine the reported inventory value assuming the lower of cost or market rule is applied to categories of feed products. (Round to nearest dollar. Do not include $ or commas.)

Answer 1

Wilson Animal Feeds

The reported inventory value is:

= 1130

Step-by-step explanation:

a) Data and Calculations:

Selling

Price Cost LCMV

Large animals:

Cattle $320 $160 $160

Horse 400 400 400

Small animals:

Cat $360 $320 $320

Dog 120 90 90

Exotic pets:

Ferret $140 $112 $112

Iguana 70 48 48

Total LCMV $1,130

b) This method of valuing inventory requires a comparison between the market value and the cost of each category of feed products. The lower between the two is chosen and then multiplied with the quantity of the item. In this example, the quantities of the items are not given.