Question

Given the acquisition cost of product ALPHA is $20, the net realizable value for product ALPHA is $17, the normal profit for product ALPHA is $1.50, and the market value (replacement cost) for product ALPHA is $14, what is the proper per unit inventory value for product ALPHA applying LCM?

Answer 1

LCM = $15.5

Step-by-step explanation:

RC = $14

Ceiling: NRV = $17

Floor: NRV – PM

Net realizable value for product ALPHA -Normal profit for product ALPHA

= $17 – $1.50= $15.5

Market= $15.5

LCM = $15.5

Therefore the proper per unit inventory value for product ALPHA applying LCM will be $15.5