muckenthaler company sells product 2005wsc for $30 per unit and uses the lifo method. the cost of one unit of 2005wsc is $27, and the replacement cost is $26. the estimated cost to dispose of a unit is $6, and the normal profit is 40% of the selling price. at what amount per unit should product 2005wsc be reported, applying lower-of-cost-or-market?

Answers

Answer 1

Answer:

Product 2005wsc should be reported at $26 per unit when applying the lower-of-cost-or-market method for Muckenthaler Company.

To determine the amount per unit that product 2005wsc should be reported at when applying the lower-of-cost-or-market (LCM) method for Muckenthaler Company, we need to consider the cost, market value, and the normal profit margin.

Step 1: Calculate the normal profit margin
Normal profit margin = Selling price * Normal profit percentage
Normal profit margin = $30 * 40% = $12

Step 2: Calculate the ceiling
Ceiling = Selling price - Estimated disposal cost
Ceiling = $30 - $6 = $24

Step 3: Calculate the floor
Floor = Ceiling - Normal profit margin
Floor = $24 - $12 = $12

Step 4: Determine the market value
Market value = Replacement cost
Market value = $26

Step 5: Compare cost, market value, ceiling, and floor to find the LCM
Cost = $27
Market value = $26
Ceiling = $24
Floor = $12

The market value falls between the ceiling and the floor, so we'll use the market value. Compare the cost and market value:
Cost = $27
Market value = $26

The LCM is the lower of the two values, which is $26. Therefore, product 2005wsc should be reported at $26 per unit when applying the lower-of-cost-or-market method.

Here is the journal entry format:

Date: April 30
- Debit: Payroll Tax Expense $12,969
- Credit: Social Security and Medicare Taxes Payable $580
- Credit: Federal Unemployment Taxes Payable $33
- Credit: State Unemployment Taxes Payable $226

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