Inventory Write-Down

Stiles Corporation uses the LIFO cost flow assumption and is in the process of applying the LCM rule for each of two products in its ending inventory. A profit margin of 30% on the selling price is considered normal for each product. Specific data for each product are as follows:

	Product A	Product B
Historical cost	$80	$96
Replacement cost	70	98
Estimated cost of disposal	32	30
Estimated selling price	150	120

Required:

1. What is the correct inventory value for each product?

Product A	$fill in the blank 1 per unit
Product B	$fill in the blank 2 per unit

2. Next Level With regard to requirement 1, what effect does the imposition of the constraints on market value have on the inventory valuations?

For Product A,

the use of a "floor" constraint prevents an excessive write-down of inventory.the use of a "ceiling" constraint prevents inventory from being valued at an amount that exceeds the amount the company could realize by selling it.the use of a "floor" constraint prevents an excessive write-down of inventory.

For Product B,

the use of a "floor" constraint prevents an excessive write-down of inventory.the use of a "ceiling" constraint prevents inventory from being valued at an amount that exceeds the amount the company could realize by selling it.