Question

Herman Company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows: Product 1 Product 2 Product 3 Cost $ 26 $ 96 $ 56 Selling price 58 138 88 Costs to sell 6 52 16 Required: What unit values should Herman use for each of its products when applying the lower of cost or net realizable value (LCNRV) rule to ending inventory?

Answer 1

What unit values should Herman use for each of its products when applying the lower of cost or net realizable value (LCNRV) rule to ending inventory?

• Product 1: $26 (cost)
• Product 2: $86 (NRV)
• Product 3: $56 (cost)

Step-by-step explanation:

Product 1 Product 2 Product 3

Cost $26 $96 $56

Selling price $58 $138 $88

Costs to sell $6 $52 $16

net realizable value $52 $86 $72

which is lower? $26 (cost) $86 (NRV) $56 (cost)

the net realizable value = selling price minus any costs associated to the sales process