Departures from Acquisition Cost Determine the proper total inventory value for each of the following items in Packer Company's ending inventory: Packer has 60 model X3 cameras in stock. The cameras cost $260 each, but their year-end replacement cost is only $240. Packer has been selling the cameras for $310, but competitors are now selling them for $280. Packer plans to match the selling price at $280. Packer's normal gross profit on cameras is 35 percent.

Question

Jon Frazier

Business

14 March, 23:18

Departures from Acquisition Cost Determine the proper total inventory value for each of the following items in Packer Company's ending inventory: Packer has 60 model X3 cameras in stock. The cameras cost $260 each, but their year-end replacement cost is only $240. Packer has been selling the cameras for $310, but competitors are now selling them for $280. Packer plans to match the selling price at $280. Packer's normal gross profit on cameras is 35 percent.

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Holden Clayton · Answer 1

Lower of cost or Market

The historical cost is 260

So we need to find the market value

First we have to determine the floor and ceiling

(NRV) Ceiling = selling price - cost to complete and disposal = $310

Floor=NRV-normal profit margin = 310 - (0.35*310) = $201.5

Market price cannot be above ceiling or below floor so we should use the current replacement cost of $240

To calculate the ending inventory = 240*60 = 14,400 (in stock)