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Sparks Furniture Company carries three lines of sofas. Information about the sofa inventory as of the end of its most recent fiscal year follows. If LCM is applied to each separate product line, what is the amount of the adjustment that must be made to the company's inventory?


Product Line Cost per Unit Market Value per Unit Quantity

Rustic $785 $895 360

Mediterranean 685 775 470

Contemporary 1,115 680 360


A. $81,900

B. $156,600

C. $35,100

D. $74,700

Respuesta :

Answer:

B. $156,600

Explanation:

The computation of the amount for adjustment made to the inventory for the company is shown below:          

Product Line Cost per unit Market value per unit Lower of Market value or Cost Cost or Market value Diff per unit Qty Adjustment Required

Rustic   $785   $895  $785  Cost value No adjustment required as cost is lower

Mediterranean $685  $775  $685  Cost value No adjustment required as cost is lower

Contemporary $1,115  $680  $680 Market value $435  360  $156,600

Since in the contemporary product line the market value per unit is lower than the cost per unit so we take the difference and then multiply the quantity so the value comes is $156,600

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