Question

In: Accounting

Keller Company sells product ZR101 for $25 per unit. The cost of one unit of ZR101...

Keller Company sells product ZR101 for $25 per unit. The cost of one unit of ZR101 is $18. The estimated cost to complete a unit is $4, and the estimated cost to sell is $6. At what amount per unit should product ZR101 be reported, applying lower-of-cost-or-net realizable value?

Solutions

Expert Solution

Net realizable value

Net realizable value is a derivation of the estimated selling price of goods, minus some deductions. The derivation is used in the determination of the lower of cost or market for on-hand inventory items. The deductions from the estimated selling price are any reasonably predicatable costs of

  • Completing the inventory
  • Transporating the inventory
  • Disposing of the inventory

Thus, the formula for net realizable value is:

Inventory market value - Costs to complete and sell goods = Net realizable value

Thus from above formula

We get net realizable value of Product ZR101 = $25 - $4 - $6

net realizable value of Product ZR101 = $15 per unit;

Cost of Product ZR101 = $18 per unit ;

By applying Lower of Cost or Net realizable value whichever is lower for the valuation of Inventory of Product ZR101 is

Valuation reported for the Product ZR101 is at Net realizable value = $15 Per unit (Lower of Cost).


Related Solutions

Grainger Company produces only one product and sells that product for $110 per unit. Cost information...
Grainger Company produces only one product and sells that product for $110 per unit. Cost information for the product is as follows: Direct Material $16 per Unit Direct Labor $26 per Unit Variable Overhead $5 per Unit Fixed Overhead $33,500 Selling expenses are $4 per unit and are all variable. Administrative expenses of $20,000 are all fixed. Grainger produced 5,000 units; sold 4,000; and had no beginning inventory. A. Compute net income under i. Absorption Costing $ ii. Variable Costing...
Grainger Company produces only one product and sells that product for $110 per unit. Cost information...
Grainger Company produces only one product and sells that product for $110 per unit. Cost information for the product is as follows: Direct Material $14 per Unit Direct Labor $25 per Unit Variable Overhead $4 per Unit Fixed Overhead $27,200 Selling expenses are $4 per unit and are all variable. Administrative expenses of $16,000 are all fixed. Grainger produced 4,000 units; sold 3,200; and had no beginning inventory. A. Compute net income under i. Absorption Costing $.  ?? ii. Variable Costing...
1. Grainger Company produces only one product and sells that product for $90 per unit. Cost...
1. Grainger Company produces only one product and sells that product for $90 per unit. Cost information for the product is as follows: Direct Material $16 per Unit Direct Labor $25 per Unit Variable Overhead $5 per Unit Fixed Overhead $40,800 Selling expenses are $5 per unit and are all variable. Administrative expenses of $30,000 are all fixed. Grainger produced 6,000 units; sold 4,800; and had no beginning inventory. A. Compute net income under i. Absorption Costing $ ii. Variable...
Grainger Company produces only one product and sells that product for $110 per unit. Cost information...
Grainger Company produces only one product and sells that product for $110 per unit. Cost information for the product is as follows: Direct Material $16 per Unit Direct Labor $24 per Unit Variable Overhead $6 per Unit Fixed Overhead $26,800 Selling expenses are $3 per unit and are all variable. Administrative expenses of $12,000 are all fixed. Grainger produced 4,000 units; sold 3,200; and had no beginning inventory. A. Compute net income under i. Absorption Costing $ ii. Variable Costing...
Grainger Company produces only one product and sells that product for $100 per unit. Cost information...
Grainger Company produces only one product and sells that product for $100 per unit. Cost information for the product is as follows: Direct Material $14 per Unit Direct Labor $24 per Unit Variable Overhead $4 per Unit Fixed Overhead $34,000 Selling expenses are $3 per unit and are all variable. Administrative expenses of $15,000 are all fixed. Grainger produced 5,000 units; sold 4,000; and had no beginning inventory. A. Compute net income under i. Absorption Costing ii. Variable Costing   ...
Product A sells for $24.00 per unit and its variable cost is $20.00 per unit. Product...
Product A sells for $24.00 per unit and its variable cost is $20.00 per unit. Product B sells for $30.00 per unit and its variable cost is $22.80 per unit. Both products use the same machines. A total of 204,000 machine hours are available each year. Product A requires 1.0 machine hour (MH) while Product B requires 1.5 MHs. The market demand for Product A is 100,000 units and the market demand for Product B is 70,000 units. The company...
Question #7: The Trojan Company sells a product for $120 per unit. The variable cost is...
Question #7: The Trojan Company sells a product for $120 per unit. The variable cost is $40 per unit, and fixed costs are $270,000. Determine the (a) break-even point in sales units, and (b) break-even points in sales units if the company desires a target profit of $36,000. Question #8: Active Kids manufactures Children’s bicycles. It has fixed costs of $5,360,000. Active Kid’s sales mix and contribution margin per unit are shown as follows:                                        Sales Mix              Contribution Margin Basic                                  ...
MFG Manufacturing sells a product for $40 per unit. The production cost of the product is...
MFG Manufacturing sells a product for $40 per unit. The production cost of the product is $21 per unit: direct materials of $8, direct labor of $7, variable overhead of $4 and fixed overhead of $2. The fixed overhead per unit comes from dividing $500,000 of fixed factory overhead by 250,000 units produced. In addition, MFG pays $3 for shipping each unit sold. Finally, MFG has fixed costs outside the factory (such as office building depreciation and salaries) that total...
Darwin Company manufactures only one product that it sells for $200 per unit. The company uses...
Darwin Company manufactures only one product that it sells for $200 per unit. The company uses plantwide overhead cost allocation based on the number of units produced. It provided the following estimates at the beginning of the year: Number of units produced 50,000 Total fixed manufacturing overhead costs $ 1,000,000 Variable manufacturing overhead per unit produced $ 12 During the year, the company had no beginning inventories of any kind and no ending raw materials or work in process inventories....
Hixson Company manufactures and sells one product for $34 per unit. The company maintains no beginning...
Hixson Company manufactures and sells one product for $34 per unit. The company maintains no beginning or ending inventories and its relevant range of production is 20,000 units to 30,000 units. When Hixson produces and sells 25,000 units, its unit costs are as follows: Amount Per Unit Direct materials $ 8.00 Direct labor $ 5.00 Variable manufacturing overhead $ 1.00 Fixed manufacturing overhead $ 6.00 Fixed selling expense $ 3.50 Fixed administrative expense $ 2.50 Sales commissions $ 4.00 Variable...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT