Marr Corporation Has Two Products in Its Ending Inventory, Each

question 36

Multiple Choice

Marr Corporation has two products in its ending inventory, each accounted for at the lower of cost or market.A profit margin of 30% on selling price is considered normal for each product.Specific data with respect to each product follows: $\begin{array}{lrr}&\text { Product \#1}&\text { Product \#2 }\\\text { Historical cost } & \$ 40.00 & \$ 70.00 \\\text { Replacement cost } & 45.00 & 54.00 \\\text { Estimated cost to dispose } & 10.00 & 26.00 \\\text { Estimated selling price } & 80.00 & 130.00\end{array}$ In pricing its ending inventory using the lower-of-cost-or-market, what unit values should Marr use for products #1 and #2, respectively?

• A)$40.00 and $65.00.
• B)$46.00 and $65.00.
• C)$46.00 and $60.00.
• D)$45.00 and $54.00.

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Definitions:

Vertical Analysis

A method of financial statement analysis in which each entry for each of the three major categories of accounts (assets, liabilities, and equity) in a balance sheet is represented as a proportion of the total account.

Financial Statement

A formal record of the financial activities and position of a business, individual, or other entity.

Accrual Accounting

An accounting method that records revenues and expenses when they are incurred, regardless of when cash transactions occur, providing a more accurate picture of a company's financial condition.

Recorded

The act of documenting financial transactions in the accounting records or ledgers of a company.