P6-7A. Lower-of-Cost-or-Net Realizable Value Method The Vandy Company had the following inventory at year-end:

Unit Price

Quantity Cost Net Realizable Value

Fans

Model X1...................................................................................300 $18 $19

Model X2..................................................................................250 23 24

Model X3..................................................................................450 29 25

Heaters

Model B7...................................................................................500 24 30

Model B8...................................................................................290 35 32

Model B9...................................................................................100 41 37

Required

a. Determines the value of ending inventory after applying the lower-of-cost-or-net realizable value method to each item of inventory.

b. Would the net income be lower under the cost method or the lower-of-cost-or-net realizable value method?