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Robust Inc. has the following information related to an item in its ending inventory. Acer Top has a cost of $125, a replacement cost of $117, a net realizable value of $133, and a normal profit margin of $17. What is the final lower-of-cost-or-market inventory value for Acer Top? $116. $117. $125. $133.

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User Wilcus
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1 Answer

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The final lower-of-cost-or-market inventory value for Acer Top is $125.

Explanation: Lower cost or market (LCM) is an inventory valuation approach where inventory is recorded at the lower of its cost or market price. Market value is defined as the current replacement cost of the inventory. The net realizable value (NRV) is the estimated selling price in the normal course of business, less the estimated costs of completion, disposal, and transportation. Normal profit margin is the amount of profit a company expects to earn from the sale of a unit of its product. In this question, Acer Top has a cost of $125, a replacement cost of $117, a net realizable value of $133, and a normal profit margin of $17. Therefore, the market value is $117 ($125 - $17) and the final LCM inventory value is the lower of the cost ($125) and the market value ($117), which is $125. Hence, the answer is $125.

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User Evan Kaminsky
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