Question

A physical inventory of Office Necessities Company taken at December 31 reveals the following.

Items	Units	Cost per unit	Market per unit
Office furniture
Desks	536	\(261	\)305
Chairs	395	227	256
Mats	687	49	43
Bookshelves	421	93	82
Filling Cabinets
Two-drawer	114	81	70
Four-drawer	298	135	122
Lateral	75	104	118
Office equipment
Projectors	370	168	200
Copier	475	317	288
Phones	302	125	117

Required

Compute the lower of cost or market for the inventory applied separately to each item.

Short answer

The lower cost or market value of inventory is$580,054.

Step-by-step solution

Definition of LCM Method

LCM method is used to evaluate the inventory of the business entity under which a lower value is selected between the historical cost and market value of the inventory for reporting purposes.

Lower of cost or market

Items	Units	Cost per unit	Market per unit	Total cost	LCM
Cost	Market
Office furniture
Desks	536	$261	$305	$139,896	$163,480	$139,896
Chairs	395	227	256	89,665	101,120	89,665
Mats	687	49	43	33,663	29,541	29,541
Bookshelves	421	93	82	39,153	34,522	34,522
Filling Cabinets
Two-drawer	114	81	70	9,234	7,980	7,980
Four-drawer	298	135	122	40,230	36,356	36,356

Lateral	75	104	118	7,800	8,850	7,800
Office equipment
Projectors	370	168	200	62,160	74,000	62,160
Copier	475	317	288	150,575	136,800	136,800
Phones	302	125	117	37,750	35,334	35,334
Total	$580,054