Lower of Cost or Market Black Corporation uses the LIFO cost flow assumption. Each unit of its inventory has a net realizable value of $300, a normal profit margin of $35, and a current replacement cost of $250. Determine the amount per unit that should be used as the market value to apply the lower of cost or market rule to determine Black’s ending inventory.

$265

Explanation:

The computation of Net realizable value-normal profit margin by using the lower of cost or market rule is shown below:-

Amount per unit = Net realizable value or Ceiling - Normal profit margin

= $300 - $35

= $265

Therefore for computing the amount per unit we simply applied the above formula i.e by deducting the normal profit margin from the net realizable value so that the amount per unit could come

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