Problem:
The inventory of Oheto Company on December 31, 2011, consists of the following items:
Part No. Quantity Cost per Unit Cost to Replace per Unit
110 600 $95 $100
111 1,000 $60 $52
112 500 $80 $76
113 200 $170 $180
120 400 $205 $208
a121 1,600 $16 $14
122 300 $240 $235
a --> Part No. 121 is obsolete and has a realizable value of $0.50 each as a scrap.
(a) Determine the inventory as of December 31, 2011, by the lower of cost or market method, applying this method directly to each item.
(b) Determine the inventory by the lower of cost or market method, applying the method to the total of the inventory.