Garcia Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2017. Jim Alcide, controller for Garcia, has gathered the following data concerning inventory. At May 31, 2017, the balance in Garcia's Raw Materials Inventory account was $408,000. Alcide summarized the relevant inventory cost and market data at May 31, 2017, in the schedule below.

Garcia Home Improvement Company uses the direct writeoff method and charges and writedowns on inventory directly to the cost of goods sold account. . Lower of Cost or Net Realizable Value

	Cost	Sales Price	Selling Costs
Aluminum siding	$70,000	$64,000	$8,000
Cedar shake siding	$86,000	$94,000	$9,200
Louvered glass doors	$112,000	$186,400	$18,100
Thermal windows	$140,00	$154,800	$14,800
Total	$408,000	$499,200	$50,100

Instructions:

(a) Assuming Garcia evaluates inventory for LCNRV at the individual product lines level what would be the balance in the inventory account after making any adjustments required by LCNRV?

(b) Assuming Garcia evaluates inventory for LCNRV at the total inventory level (using total inventory, not each individual product) what would be the balance in the inventory account after making any adjustments required by LCNRV?

(c) Explain the rationale for the use of the LCNRV rule as it applies to inventories.