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# 10. Lexington Company sells product 1976NLC for \$50 per unit.

10. Lexington Company sells product 1976NLC for \$50 per unit. The cost of one unit of 1976NLC is \$45, and the replacement cost is \$43. The estimated cost to dispose of a unit is \$10, and the normal profit is 40%. At what amount per unit should product 1976NLC be reported, applying lower-of-cost-or-market?
A) \$20.
B) \$45.
C) \$40.
D) \$43.
HiCustomer

Regards

Linda
Customer: replied 5 years ago.
Hi Linda,
Thank you for your help. I appreciate the answer, but can you explain how to approach this question? I'd like to understand how you arrived at \$40. I got this question wrong on a recent exam and I'm having trouble understanding how to approach these types of questions in the future.

Thanks again,

-Matt
NRV (Net Rel Value) = 50 - 10 = \$40 (Upper Limit)
RC (Replacement Cost) = 43
NRV - Normal Profit = 40 - (50 x 40%) = 20 (Lower Limit)

So the market value from above would be \$40 and the cost is 45. So the answer is \$40.

Regards

Linda