Determine the value of inventory using the 'lower of cost or net realisable value' rule.
$\begin{array}{cccc}
& \text { Number } & \text { Cost Each } & \text { Net realisable value each } \
\text { Item LA } & 15 & \$ 20 & \$ 35 \
\text { tem FA } & 3 & \$ 25 & \$ 38 \
\text { tem GA } & 1 & \$ 18 & \$ 10
\end{array}$

A)$393
B)$385
C)$649
D)$657

Question

Determine the value of inventory using the 'lower of cost or net realisable value' rule.
$\begin{array}{cccc} 
& \text { Number } & \text { Cost Each } & \text { Net realisable value each } \
\text { Item LA } & 15 & \$ 20 & \$ 35 \
\text { tem FA } & 3 & \$ 25 & \$ 38 \
\text { tem GA } & 1 & \$ 18 & \$ 10
\end{array}$

A)$393
B)$385
C)$649
D)$657

Quizplus · Accepted Answer

To apply the 'lower of cost or net realisable value' rule, we need to compare the cost of each item with its net realisable value (NRV) and choose the lower value. Then, we multiply this value by the number of units to obtain the total value of the inventory.

For Item LA: the cost is $20 and the NRV is $35, so we choose the NRV as the lower value.
Total value of Item LA = 15 x $35 = $525

For Item FA: the cost is $25 and the NRV is $38, so we choose the cost as the lower value.
Total value of Item FA = 3 x $25 = $75

For Item GA: the cost is $18 and the NRV is $10, so we choose the NRV as the lower value.
Total value of Item GA = 1 x $10 = $10

Therefore, the total value of the inventory is $525 + $75 + $10 = $610.
Hence, the correct option is B).

Determine the Value of Inventory Using the 'Lower of Cost