Lower of Cost or Market Brandise Company manufactures electric motors for use in household appliances. At the end of the year, Brandise held 200 motors that it had produced for a company that is now out of business. The cost of producing each of the motors was $78.

Brandise believes that it can sell the motors for $85 each, but selling and delivery costs will be $11 per unit. New efficiencies introduced into Brandise’s production process permit the company to produce the motors now at a cost of

$58 each.

a. What arguments can be made for valuing the motors at cost?

b. What arguments can be made for valuing the motors at net realizable value?

c. What arguments can be made for valuing the motors at replacement cost?

d. What value should be placed on the motors for financial reporting purposes? Explain why.