Lower-Of-Cost-Or-Market (LCM) Is to Be Applied to the Following Situation

question 173

Multiple Choice

Lower-of-cost-or-market (LCM) is to be applied to the following situation: Cost, $10; Net realizable value, $8; Replacement cost, $7; Net realizable value less normal profit, $7.50. One unit in inventory should be valued at:

• A) $7.00
• B) $7.50
• C) $8.00
• D) $10.00

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Definitions:

Price Ratio

A comparison of the prices of two goods or services, used to analyze consumer preferences or the cost-effectiveness of different products.

Income

The money received by an individual or business in exchange for labor, services, or investment, often measured on a regular basis like monthly or yearly.

Marginal Utility

Marginal utility refers to the extra satisfaction or benefit a consumer receives by consuming an additional unit of a good or service.

Total Utility

The complete gratification or advantage gained from using a specific quantity of a product or service.