Question

The following information pertains to one item of inventory of the Simon Company: Per unit Cost $ 200, Replacement cost 170, Selling price 190, Disposal costs 10, Normal profit margin 30. Using the lower of cost or market method, this item should be valued at:_______.A. $150.

B. $200.
C. $170.
D. $190.

Answer 1

correct option is C. $170

Step-by-step explanation:

given data

Per unit Cost = $200

Replacement cost = 170

Selling price = 190

Disposal costs = 10

Normal profit margin = 30

solution

we get here Lower of cost or market method that is express as

Lower of Per unit Cost or Replacement cost or Selling price - (profit margin -Disposal costs ) ......................1

take value here

Lower of $200 or $170 or ( $190 - ( $30 - $10 ) )

so here Lower of $200 or $170 or $170

so lower is $170

so correct option is C. $170