- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 22. Inventories
- Subject 5. Measurement of Inventory Value
CFA Practice Question
An item of inventory with an invoice price of $80, on which 50% is added as markup, has a current replacement cost of $82. Under LCM, which amount should be used to determine the value of this item of inventory?
A. $123
B. $80
C. $82
Explanation: Under LCM, the lower of cost or market is used. In this case, cost ($80) is lower than market ($82).
User Contributed Comments 3
| User | Comment |
|---|---|
| murli | Invoice price = acquisition price! |
| Pooh | if the mv is higher than cost, nothing is done, unless when the inventory is sold. |
| teje | if MV is lower than cost, than need to calculate what (market price - selling cost) - normal profit realizable and see if the market price is below this or above. If above than use market, if below use the value obtained from the above formula. |