Applying the Lower of Cost or Market to Each Item

question 192

Multiple Choice

Applying the lower of cost or market to each item of inventory, what should the total inventory value be for the following items
$$\begin{array} { | c | c | c | c | c | c | } \hline \text { Item } & \begin{array} { c } \text { Inventory } \\\text { Quantity }\end{array} & \begin{array} { c } \text { Cost per } \\\text { Unit }\end{array} & \begin{array} { c } \text { Market value } \\\text { perUnit }\end{array} & \begin{array} { c } \text { Total } \\\text { Cost }\end{array} & \begin{array} { c } \text { Total } \\\text { Market }\end{array} \\\hline \mathrm { A } & 300 & \$ 15.00 & \$ 14.50 & \$ 4,500 & \$ 4,350 \\\hline \mathrm { B } & 200 & \$ 14.00 & \$ 15.00 & \$ 2,800 & \$ 3,000 \\\hline \mathrm { C } & 100 & \$ 17.00 & \$ 17.50 & \$ 1,700 & \$ 1,750 \\\hline\end{array}$$

• A) $8,850
• B) $9,000
• C) $9,100
• D) $9,250

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Definitions:

Differential Costs

The difference in cost between two alternative decisions or changes in levels of operation.

Variable

An element that can change or vary, often used in mathematical modeling, programming, and statistical analysis to represent changeable data.

Committed Fixed Costs

Long-term fixed costs that cannot be easily altered in the short term, such as leases, insurance, and salaries for permanent staff.

Planning Horizon

The period into the future for which a company or individual makes plans and decisions, considering both short-term and long-term objectives.