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Lower of Cost or Market Stiles Corporation uses the lower of cost or market rule for each of two products in its ending inventory. A
Lower of Cost or Market
Stiles Corporation uses the lower of cost or market 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:
- Assume that Stiles uses the FIFO inventory method. What is the correct inventory value for each product?
Product A $ per unit Product B $ per unit - Assume that Stiles uses the LIFO inventory method. What is the correct inventory value for each product?
Product A $ per unit Product B $ per unit -
Fill in the blanks using either celling, floor or profit(only choose one)
For Product A, the use of a ______________________ constraint prevents an excessive write-down of inventory. If the ______________constraint were not imposed, an excessive loss would be recognized in the period of the write-down followed by an excessive profit in future periods. Therefore, the imposition of the _______________constraint prevents the profit distortion that would occur by an understatement of inventory and overstatement of losses in the current period. -
For Product B, the use of a " __________________" constraint prevents inventory from being valued at an amount that exceeds the amount the company could realize by seliling it.
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