Question

A company’s normal selling price for its product is $27 per unit. However, due to market competition, the selling price has fallen to $22 per unit. This company's current FIFO inventory consists of 130 units purchased at $23 per unit. Net realizable value has fallen to $20 per unit. Calculate the value of this company's inventory at the lower of cost or market.

Answer 1

The correct answer is $2,600.

Step-by-step explanation:

According to the scenario, the given data are as follows:

Selling price = $27

After competition, Selling price = $22

Inventory consist = 130 units

Net realizable value = $20

So, we can calculate the value of this inventory by using following formula:

lower of the cost = $20

So, Value of this inventory = Inventory units × $20

= 130 × $20

= $2,600 units