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A company normally sells it products for $20 per unit, which includes a profit margin of 25%. However, the selling price has fallen to $15 per unit.?

This company's current inventory consists200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit.

Calculate the value of inventory at the lower of cost or market.

a. $2,550.

b. $2,600.

c. $2,700.

d. $3,000.

e. $3,200.

Profit Margins Accounting Company Building Margin Analysis Costing
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Question added by Mohammed Asim Nehal , M Asim Nehal & Co , Chartered Accountants
Date Posted: 2015/07/16
Upvote (1) Views (91) Followers (3) Answers (2) Report Question
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Mostafa Salama, CMA
by Mostafa Salama, CMA , Accounts Officer , QAFCO (Qatar Fertiliser Company)

To calculate Market price:

NRV Ceiling = (M.P), NRV Floor = (M.P - Profit Margine) =( - (*%) =.

Then, NRV Ceiling < Replacement cost< NRV Floor, So Market Price =   Which is lower than cost (), Then Inventory : * =

 

Gayasuddin Mohammed
by Gayasuddin Mohammed , Advocate , Practicing Law before High Court at Hyderabad

Normal sell price $20 per unit.profit margi of25% mean, profit is $5 per unit.selling price has come down to $15 per unitcurrent inventory consists200 units purchased at cost $16 per unit.total cost of current inventory consists of200 units =200 *16 = $3200Value of inventory at the current market price/cost =200 *15 = $3000Please correct me if I did anything wrong or missed out in this problem. Thanks

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