Question

oriole corporation has two products in its ending inventory, each accounted for at the lower of cost or market. a profit margin of 30% on selling price is considered normal for each product. specific data with respect to each product follows:In pricing its ending inventory using the lower-of-cost-or-market, what unit values, rounded to the nearest dollar, should Oriole use for products

Answer 1

• Product 1 = $20
• Product 2 = $32.50

Step-by-step explanation:

Using the lower-of-cost-or market means that the market value or the historical cost is used to record the inventory depending on which is lower.

Product 1

Market Value = Net realizable value - Profit margin

= (Estimated selling price - Estimated cost to dispose) - ( Estimated selling price * Profit margin)

= (40 - 5) - (40 * 30%)

= 35 - 12

= $23

Historical cost = $20

Lower value is Historical cost so $20 would be used by Oriole

Product 2

= (Estimated selling price - Estimated cost to dispose) - ( Estimated selling price * Profit margin)

= (65 - 13) - (65 * 30%)

= 52 - 19.5

= $32.50

Historical Cost = $35

Lower cost is Market value so ending inventory is $32.50