Question

#4 Lower of Cost or Market

Weldon Animal Feeds has developed the following data to calculate LIFO lower of cost or market for its products. The individual products are listed individually among their categories of feed (in thousands):

	Selling		Cost to
	Price	Cost	Replace
Large animals:
Cattle	$320	$160	$170
Horse	400	400	325
Small animals:
Cat	$360	$320	$280
Dog	120	90	40
Exotic pets:
Ferret	$140	$112	$98
Iguana	70	48	21

The disposal costs are 20% of the selling price and the normal profit margin on all feed is 25% of the selling price.

            Required: Determine the reported inventory value assuming the LIFO lower of cost or market rule is applied to categories of feed products.

Answer 1

	Selling Price	Cost	Cost to Replace	Disposal cost	Net Realizable Value(Selling price - Disposal Cost)	Normal profit	NRV-Normal Profit	Market	Lower of Cost or Market
Large animals:
Cattle	320	160	170	64	256	80	176	176	160
Horse	400	400	325	80	320	100	220	320	320
Small animals:
Cat	360	320	280	72	288	90	198	280	280
Dog	120	90	40	24	96	30	66	66	66
Exotic pets:
Ferret	140	112	98	28	112	35	77	98	98
Iguana	70	48	21	14	56	18	39	39	39
Total Ending Inventory Value								963
Note 1: Market price is same as replacement cost, but if replacement cost is more than NRV then NRV will be the market value(as in Horse), Also market price should not be less then NRV-NP.otherwise NRV-Normal profit will be market price (As in Cattle , Dog and Iguana)