Precision Limited deals in highly sophisticated engineering items. It imports these items in semi finished form. These items are processed further to meet the precise requirement of the customers. There has been a substantial decline in the selling price of some of the finished items as well the import price of these items.

As on 31st March, the details of inventory is given below:

1. For each inventory item, ascertain the value at which it should be included in the ending inventory, assuming each inventory item is treated separately?

2. What will be the impact of applying ‘lower of cost or net realizable value’ principle on the profit of the company in the current year?

3. What will be the impact in the next year?

4. If all the above items are taken together for inventory valuation, what will be the inventory valuation and impact on profit?

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Item Cost Incurred 101 102 103 104 105 720,000 550,300 335,000 570,000 425,000 Additional Cost to be Incurred Estimated Selling Price 80,000 45,000 50,000 60,000 30,000 1,050,000 525,000 400,000 650,000 390,000