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Testbank Multiple Choice Question 76 Given the historical cost of product Dominoe is $35, the selling price of product Dominoe is $40, costs to sell product Dominoe are $4, the replacement cost for product Dominoe is $41, and the normal profit margin is 20% of sales price, what is the cost amount that should be used in the lower-of-cost-or-market comparison

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Answer: $35

Explanation:

When using the lower-of-cost-or-market comparison method, we value the product at the lower of the market value or the historical cost amount.

The market value here is the replacement cost which is $41.

The historical cost is $35.

The historical cost is lower so the product will be valued at $35.