Question

The inventory of Royal Decking consisted of five products. Information about the December 31, 2018, inventory is as follows: Per Unit Product Cost Selling Price A $ 200 $ 220 B 240 260 C 120 240 D 160 300 E 100 140 Costs to sell consist of a sales commission equal to 10% of selling price and shipping costs equal to 5% of cost. Required: What unit value should Royal Decking use for each of its products when applying the lower of cost or net realizable value (LCNRV) rule to units of ending inventory

Answer 1

To apply the LCNRV rule to units of ending inventory, Royal Decking should use the lower of cost or net realizable value as the unit value for each product. This is calculated by subtracting the costs to sell from the selling price and multiplying by the appropriate percentage.

Step-by-step explanation:

To apply the lower of cost or net realizable value (LCNRV) rule to units of ending inventory, Royal Decking should use the lower of cost or net realizable value as the unit value for each product. The net realizable value is the selling price minus costs to sell, which include a sales commission of 10% of the selling price and shipping costs of 5% of the cost. To calculate the unit value, subtract the costs to sell from the selling price and then multiply by the appropriate percentage. Here's the calculation for each product:

• Product A: ($220 - ($220 * 10%) - ($200 * 5%)) = $203
• Product B: ($260 - ($260 * 10%) - ($240 * 5%)) = $239
• Product C: ($240 - ($240 * 10%) - ($120 * 5%)) = $217
• Product D: ($300 - ($300 * 10%) - ($160 * 5%)) = $274
• Product E: ($140 - ($140 * 10%) - ($100 * 5%)) = $121

Answer 2

Step-by-step explanation:

Selling Price Commission Shipping NRV Cost

A 220 220*10% = 22 200*5% = 10 (220-22-10) 188 200

B 260 260*10%=26 240*5%=12 (260-26-12) 222 240

C 240 240*10%=24 120*5%=6 (240-24-6) 210 120

D 300 300*10%=30 160*5%=8 (300-30-8) 262 160

E 140 140*10%= 14 100*5%=5 (140-14-5) 121 100

Therefore ,the unit inventory valuation at lower of cost or net realizable value =

Products Valuation

A 188

B 222

C 120

D 160

E 100