A company has the following per unit original costs and net realizable values for its inventory: Part A: 50 units with a cost of $5, and net realizable value of $4.50
Part B: 75 units with a cost of $6, and net realizable value of $6.50
Part C: 160 units with a cost of $3, and net realizable value of $2.50
Under the lower of cost and net realizable value, the total value of this company's ending inventory is:
A) $1,180.00.
B) $1,075.00.
C) $1,075.00 or $1,112.50, depending upon whether lower of cost and net realizable value is applied to individual items or the inventory as a whole.
D) $1,112.50.
E) $1,180.00 or $1,075.00, depending upon whether lower of cost and net realizable value is applied to individual items or to the inventory as a whole.

Question

Quizplus · Accepted Answer

The lower of cost and net realizable value is applied to each item individually. For Part A, the value is 50 units x $4.50 = $225. For Part B, the value is 75 units x $6 = $450. For Part C, the value is 160 units x $2.50 = $400. The total value is $225 + $450 + $400 = $1,075.

A Company Has the Following Per Unit Original Costs and Net