In October 2010, Cytotech launched a co-developed Google TV product called the Revue at a price of $299. In advance of the product launch Cytotech contracted with a Chinese manufacturer to purchase components and produce the Revue on its behalf. Logitech estimated sales of 350,000 units during the 2010 holiday season.

At its launch the product received largely poor reviews, with most analysts saying that the product was not ready for prime-time. During the 2010 holiday season, Cytotech sold only 165,000 units. On December 7, 2010, facing poor sales numbers, Cytotech instructed its manufacturer not to ship over 26,000 finished Revue units. In addition to the cost of the 26,000 units of inventory, Cytotech was also on the hook for over $11 million dollars of Revue inventory components that the manufacturer had purchased on behalf of Cytotech.

In 2016, the SEC concluded its investigation of Cytotech by reaching an agreement with Cytotech and two of its former executives. Read pages 1 through 6 of the SECs enforcement release (https://www.sec.gov/litigation/admin/2016/34-77644.pdf). Consider the facts laid out in the release. In number 5 on page 3 of the release, the SEC states that Cytotech performed an LCM analysis of Revue inventory and determined that no adjustment was necessary. What is an LCM analysis? Considering the facts laid out in the SECs enforcement action, do you believe this analysis was correct? Why or why not?