Nationwide company makes desks. Most of the desks are sold at catalogue prices. At December 31, 2020, the following finished desks appear in the companys inventory:

Finished Desks Type X Type Y Type Z Type T

2020 catalogue selling price $460 $490 $890 $1,040

FIFO cost per inventory list, Dec. 31, 2020 410 450 830 960

Estimated current cost to manufacture

(at Dec. 31, 2020, and early 2021) 460 440 790 1,000

Sales commissions and estimated

other costs of disposal 40 65 95 130

2021 catalogue selling price 575 650 780 1,420

Quantity on hand 15 117 113 110

The 2020 catalogue was in effect through November 2020, and the 2021 catalogue is effective as of December 1, 2020. All catalogue prices are net of the usual discounts. Generally, the company tries to obtain a 20% gross margin on the selling price and it has usually been successful in achieving this.

Required:

a. Assume that the company has adopted a lower of FIFO cost and net realizable value approach for the valuation of inventories and applies it on an individual inventory item basis. At what total inventory value will the desks appear on the company's December 31, 2020 SFP?

LC& NRV
Type	Qty.	Cost per unit	Total cost	Est. selling price	Est. selling expense	NRV per unit	Total NRV	LC and NRV
X	15
Y	117
Z	113
T	110

b. Explain the rationale for using the lower of cost and net realizable rule for inventories.

c. Explain the impact if inventory was valued at lower of cost and net realizable value on a total basis.