Michael Bolton Company follows the practice of pricing its inventory at the lowe
ID: 2486379 • Letter: M
Question
Michael Bolton Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis.
From the information above, determine the amount of Bolton Company inventory.
The amount of Bolton Company's inventory: $___________
Item No Quantity Cost Per Unit Cost to Replace Estimated Selling price Cost of Completion and Disposal Normal Profit 1320 1800 $5.92 $5.55 $8.33 $0.65 $2.31 1333 1500 5.00 4.26 6.48 0.93 0.93 1426 1400 8.33 6.85 9.25 0.74 1.85 1437 1600 6.66 5.74 5.92 0.46 1.67 1510 1300 4.16 3.70 6.01 1.48 1.11 1522 1100 5.55 5.00 7.03 0.74 0.93 1573 3600 3.33 2.96 4.63 1.39 0.93 1626 1600 8.70 9.62 11.10 0.93 1.85Explanation / Answer
Rule :
If the current replacement cost is between the floor and the ceiling, the current replacement cost is the market amount.
If the current replacement cost is greater than the ceiling, the ceiling amount is the market amount.
If the current replacement cost is lower than the floor, the floor amount is the market amount
lower of cost or market (LCM) rule: LCM is the lower of cost or replacement cost, with the replacement cost being no higher than NRV and no lower than NRV minus the normal profit.
Celing Price = NRV = Estimated selling price - cost of completion and disposal
Floor Price = NRV - normal profit
Item No Quantity Cost per unit Cost to replace estimat-ed selling price cost of complet-ion and disposal Net Realizable Value - (Celing) Normal profit NRV - normal profit (Floor) Market Value Valur of inventory (Lower of cost or market) Cost of itemwise inventory 1320 1800 5.92 5.55 8.33 0.63 7.70 2.31 5.39 5.55 5.55 9,990.00 1333 1500 5.00 4.26 6.48 0.93 5.55 0.93 4.62 4.62 4.62 6,930.00 1426 1400 8.33 6.85 9.25 0.74 8.51 1.85 6.66 6.85 6.85 9,590.00 1437 1600 6.66 5.74 5.92 0.46 5.46 1.67 3.79 5.46 5.46 8,736.00 1510 1300 4.16 3.70 6.01 1.48 4.53 1.11 3.42 3.70 3.70 4,810.00 1522 1100 5.55 5.00 7.03 0.74 6.29 0.93 5.36 5.36 5.36 5,896.00 1573 3600 3.33 2.96 4.63 1.39 3.24 0.93 2.31 2.96 2.96 10,656.00 1626 1500 8.70 9.62 11.10 0.93 10.17 1.85 8.32 9.62 8.70 13,050.00 Total Cost of Inventory $ 69,658.00