Question

Oriole Company sells three different products. The following information is available on December 31:

Inventory item		Units.		Cost per unit.		Market value per unit
X		350		$5		$4.00
Y		700		$2.0		$1.50
Z		1740		$3.0		$4.50

When applying the lower of cost or market rule to each item, what will Oriole total ending inventory balance be?

Answer 1

As per lower of cost or market rule, unit cost is lower of cost or market value per unit.
Calculation of Balance of Ending Inventory:
Inventory		Units (a)		Cost per unit		Market Value per unit			Lower of cost or Market Value (b)				Inventory Balance (a*b)
X		350		$         5.0		$         4.0				$         4.0			$       1,400
Y		700		$         2.0		$         1.5				$         1.5			$       1,050
Z		1,740		$         3.0		$         4.5				$         3.0			$       5,220
Total		2,790											$       7,670
Thus,
Total ending inventory balance of 2790 units is $ 7,670