The Everything Store has just removed a demonstrator from display and demonstration-it will be sold at a reduced price. The original price was $180 and the original cost was $140. Additional information: $\begin{array} { | l | l | }
\hline \text { Estimated repairs before selling } & \$ 20 \
\hline \text { Estimated selling price reduced to } & 120 \
\hline \text { Estimated selling costs } & 7 \
\hline \text { Normal profit margin } & 1 / 3 \
\hline
\end{array}$
The demonstrator will be included in the used inventory balance. What inventory value should be assigned to the used demonstrator?
A) $73
B) $80
C) $93
D) $120

Question

The Everything Store has just removed a demonstrator from display and demonstration-it will be sold at a reduced price. The original price was $180 and the original cost was $140. Additional information: $\begin{array} { | l | l | } 
\hline \text { Estimated repairs before selling } & \$ 20 \
\hline \text { Estimated selling price reduced to } & 120 \
\hline \text { Estimated selling costs } & 7 \
\hline \text { Normal profit margin } & 1 / 3 \
\hline
\end{array}$
 The demonstrator will be included in the used inventory balance. What inventory value should be assigned to the used demonstrator?
A) $73
B) $80
C) $93
D) $120

Quizplus · Accepted Answer

The inventory value should be the cost to the store, which includes the original cost plus repair costs, minus any profit margin that would have been sought on a new item. The original cost is $140, and repairs are $20, totaling $160. The normal profit margin is 1/3, which is applied to the original selling price ($180), not the reduced selling price. Therefore, the expected profit would have been $60 (1/3 of $180). However, since this is a used item being sold at a reduced price, we don't subtract the profit margin from the cost. Thus, the inventory value is the cost to the store, which is $140 (original cost) + $20 (repairs) = $160. Since none of the provided options match this calculation and considering the context of the question, the closest correct option based on the given choices and the typical approach to such a problem would be to consider the cost to the store without the profit margin, which is not directly provided in the options. The mistake in the explanation indicates a misunderstanding of the question's requirement for the inventory value, which should reflect the cost to the store (including repairs) without considering the profit margin for selling purposes. Given this, the correct approach to find the inventory value would involve adjusting the cost based on the information provided, which typically includes repair costs but not the subtraction of expected profit, leading to a reevaluation of the correct choice based on the cost and adjustments provided in the scenario.

The Everything Store Has Just Removed a Demonstrator from Display