{"id":188321,"date":"2025-02-06T17:54:15","date_gmt":"2025-02-06T17:54:15","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=188321"},"modified":"2025-02-06T17:54:17","modified_gmt":"2025-02-06T17:54:17","slug":"wangerin-company-follows-the-practice-of-pricing-its-inventory-at-the-lower","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/02\/06\/wangerin-company-follows-the-practice-of-pricing-its-inventory-at-the-lower\/","title":{"rendered":"Wangerin Company follows the practice of pricing its inventory at the lower"},"content":{"rendered":"\n<p>Wangerin Company follows the practice of pricing its inventory at the lower\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\ufffdof\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\ufffdcost\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\ufffdor\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\ufffdmarket, on an individual-item basis.<\/p>\n\n\n\n<p>Item No. Quantity Cost\u00c3\u201a\u00c2 per\u00c3\u201a\u00c2 Unit Cost\u00c3\u201a\u00c2 to\u00c3\u201a\u00c2 Replace Estimated\u00c3\u201a\u00c2 Selling\u00c3\u201a\u00c2 Price Cost\u00c3\u201a\u00c2 of\u00c3\u201a\u00c2 Completion\u00c3\u201a\u00c2 and\u00c3\u201a\u00c2 Disposal Normal\u00c3\u201a\u00c2 Profit<br>01320 1,2000\u00c3\u201a\u00c2 $3.20000 $3.00000 $4.50000000 $0.3500000000 $1.25000<br>01333 9000 2.70000 2.30000 3.50000000 0.5000000000 0.50000<br>01426 8000\u00c3\u201a\u00c2 4.50000 3.70000 5.00000000 0.4000000000 1.00000<br>01437 1,0000\u00c3\u201a\u00c2 3.60000 3.10000 3.20000000 0.2500000000 0.90000<br>01510 7000\u00c3\u201a\u00c2 2.25000 2.00000 3.25000000 0.8000000000 0.60000<br>01522 5000\u00c3\u201a\u00c2 3.00000 2.70000 3.80000000 0.4000000000 0.50000<br>01573 3,0000\u00c3\u201a\u00c2 1.80000 1.60000 2.50000000 0.7500000000 0.50000<br>01626 1,0000\u00c3\u201a\u00c2 4.70000 5.20000 6.00000000 0.5000000000 1.00000<br>Instructions<br>From the information above, determine the amount of Wangerin Company inventory.<\/p>\n\n\n\n<p><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\"><strong>The Correct Answer and Explanation is :<\/strong><\/mark><\/p>\n\n\n\n<p>To determine the amount of Wangerin Company&#8217;s inventory based on the &#8220;lower of cost or market&#8221; method, we need to follow a series of steps for each item in the list. Here&#8217;s the breakdown:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Step 1: Compare Cost and Market<\/h3>\n\n\n\n<p>For each item, we compare the cost per unit with the market value, where market value is defined as the replacement cost. However, if the replacement cost is lower than the net realizable value (which is the estimated selling price minus the cost of completion and disposal), we need to use the lower of these values as the market value.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Step 2: Calculate the &#8220;Lower of Cost or Market&#8221;<\/h3>\n\n\n\n<p>The formula is:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Lower of Cost or Market<\/strong> = Min(Cost per Unit, Market Value)<\/li>\n<\/ul>\n\n\n\n<p>The <strong>market value<\/strong> is typically determined as:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Market Value = Min(Replacement Cost, Estimated Selling Price &#8211; Cost of Completion and Disposal)<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Step 3: Multiply by Quantity<\/h3>\n\n\n\n<p>Once the lower of cost or market has been determined for each item, we multiply this by the quantity on hand to find the total value of each item in the inventory.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Step 4: Sum the Results<\/h3>\n\n\n\n<p>The total inventory value is the sum of the values for all items.<\/p>\n\n\n\n<p>Let&#8217;s go through each item and calculate the lower of cost or market, and then determine the total value of inventory.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Breakdown of Each Item:<\/h3>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Item 01320:<\/strong><\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Cost per Unit: $3.20<\/li>\n\n\n\n<li>Replacement Cost: $3.00<\/li>\n\n\n\n<li>Estimated Selling Price: $4.50<\/li>\n\n\n\n<li>Cost of Completion and Disposal: $0.35<\/li>\n\n\n\n<li>Net Realizable Value (NRV) = $4.50 &#8211; $0.35 = $4.15<\/li>\n\n\n\n<li>Market Value = Min($3.00, $4.15) = $3.00<\/li>\n\n\n\n<li>Lower of Cost or Market = Min($3.20, $3.00) = $3.00<\/li>\n\n\n\n<li>Total Value = 1,200 \u00d7 $3.00 = $3,600<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Item 01333:<\/strong><\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Cost per Unit: $2.70<\/li>\n\n\n\n<li>Replacement Cost: $2.30<\/li>\n\n\n\n<li>Estimated Selling Price: $3.50<\/li>\n\n\n\n<li>Cost of Completion and Disposal: $0.50<\/li>\n\n\n\n<li>NRV = $3.50 &#8211; $0.50 = $3.00<\/li>\n\n\n\n<li>Market Value = Min($2.30, $3.00) = $2.30<\/li>\n\n\n\n<li>Lower of Cost or Market = Min($2.70, $2.30) = $2.30<\/li>\n\n\n\n<li>Total Value = 900 \u00d7 $2.30 = $2,070<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Item 01426:<\/strong><\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Cost per Unit: $4.50<\/li>\n\n\n\n<li>Replacement Cost: $3.70<\/li>\n\n\n\n<li>Estimated Selling Price: $5.00<\/li>\n\n\n\n<li>Cost of Completion and Disposal: $0.40<\/li>\n\n\n\n<li>NRV = $5.00 &#8211; $0.40 = $4.60<\/li>\n\n\n\n<li>Market Value = Min($3.70, $4.60) = $3.70<\/li>\n\n\n\n<li>Lower of Cost or Market = Min($4.50, $3.70) = $3.70<\/li>\n\n\n\n<li>Total Value = 8,000 \u00d7 $3.70 = $29,600<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Item 01437:<\/strong><\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Cost per Unit: $3.60<\/li>\n\n\n\n<li>Replacement Cost: $3.10<\/li>\n\n\n\n<li>Estimated Selling Price: $3.20<\/li>\n\n\n\n<li>Cost of Completion and Disposal: $0.25<\/li>\n\n\n\n<li>NRV = $3.20 &#8211; $0.25 = $2.95<\/li>\n\n\n\n<li>Market Value = Min($3.10, $2.95) = $2.95<\/li>\n\n\n\n<li>Lower of Cost or Market = Min($3.60, $2.95) = $2.95<\/li>\n\n\n\n<li>Total Value = 1,000 \u00d7 $2.95 = $2,950<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Item 01510:<\/strong><\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Cost per Unit: $2.25<\/li>\n\n\n\n<li>Replacement Cost: $2.00<\/li>\n\n\n\n<li>Estimated Selling Price: $3.25<\/li>\n\n\n\n<li>Cost of Completion and Disposal: $0.80<\/li>\n\n\n\n<li>NRV = $3.25 &#8211; $0.80 = $2.45<\/li>\n\n\n\n<li>Market Value = Min($2.00, $2.45) = $2.00<\/li>\n\n\n\n<li>Lower of Cost or Market = Min($2.25, $2.00) = $2.00<\/li>\n\n\n\n<li>Total Value = 7,000 \u00d7 $2.00 = $14,000<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Item 01522:<\/strong><\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Cost per Unit: $3.00<\/li>\n\n\n\n<li>Replacement Cost: $2.70<\/li>\n\n\n\n<li>Estimated Selling Price: $3.80<\/li>\n\n\n\n<li>Cost of Completion and Disposal: $0.40<\/li>\n\n\n\n<li>NRV = $3.80 &#8211; $0.40 = $3.40<\/li>\n\n\n\n<li>Market Value = Min($2.70, $3.40) = $2.70<\/li>\n\n\n\n<li>Lower of Cost or Market = Min($3.00, $2.70) = $2.70<\/li>\n\n\n\n<li>Total Value = 5,000 \u00d7 $2.70 = $13,500<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Item 01573:<\/strong><\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Cost per Unit: $1.80<\/li>\n\n\n\n<li>Replacement Cost: $1.60<\/li>\n\n\n\n<li>Estimated Selling Price: $2.50<\/li>\n\n\n\n<li>Cost of Completion and Disposal: $0.75<\/li>\n\n\n\n<li>NRV = $2.50 &#8211; $0.75 = $1.75<\/li>\n\n\n\n<li>Market Value = Min($1.60, $1.75) = $1.60<\/li>\n\n\n\n<li>Lower of Cost or Market = Min($1.80, $1.60) = $1.60<\/li>\n\n\n\n<li>Total Value = 3,000 \u00d7 $1.60 = $4,800<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Item 01626:<\/strong><\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Cost per Unit: $4.70<\/li>\n\n\n\n<li>Replacement Cost: $5.20<\/li>\n\n\n\n<li>Estimated Selling Price: $6.00<\/li>\n\n\n\n<li>Cost of Completion and Disposal: $0.50<\/li>\n\n\n\n<li>NRV = $6.00 &#8211; $0.50 = $5.50<\/li>\n\n\n\n<li>Market Value = Min($5.20, $5.50) = $5.20<\/li>\n\n\n\n<li>Lower of Cost or Market = Min($4.70, $5.20) = $4.70<\/li>\n\n\n\n<li>Total Value = 1,000 \u00d7 $4.70 = $4,700<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Total Inventory Value:<\/h3>\n\n\n\n<p>Now we sum up the total values for each item:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Total Inventory = $3,600 + $2,070 + $29,600 + $2,950 + $14,000 + $13,500 + $4,800 + $4,700 = <strong>$75,720<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Thus, the total inventory value for Wangerin Company is <strong>$75,720<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Wangerin Company follows the practice of pricing its inventory at the lower\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\ufffdof\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\ufffdcost\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\ufffdor\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\ufffdmarket, on an individual-item basis. Item No. Quantity Cost\u00c3\u201a\u00c2 per\u00c3\u201a\u00c2 Unit Cost\u00c3\u201a\u00c2 to\u00c3\u201a\u00c2 Replace Estimated\u00c3\u201a\u00c2 Selling\u00c3\u201a\u00c2 Price Cost\u00c3\u201a\u00c2 of\u00c3\u201a\u00c2 Completion\u00c3\u201a\u00c2 and\u00c3\u201a\u00c2 Disposal Normal\u00c3\u201a\u00c2 Profit01320 1,2000\u00c3\u201a\u00c2 $3.20000 $3.00000 $4.50000000 $0.3500000000 $1.2500001333 9000 2.70000 2.30000 3.50000000 0.5000000000 0.5000001426 8000\u00c3\u201a\u00c2 4.50000 3.70000 5.00000000 0.4000000000 1.0000001437 1,0000\u00c3\u201a\u00c2 3.60000 [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-188321","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/188321","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=188321"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/188321\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=188321"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=188321"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=188321"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}