Question: A. Given the historical cost of product Z is $20, the selling price of product Z is $25, costs to sell product Z are $3, the replacement cost for product Z is $21, and the normal profit margin is 40% of sales price, what is the market value that should be used in the lower-of-cost-or-market comparison?
a. $18.
b. $20.
c. $21.
d. $22.
B. What is the amount that should be used to value the inventory under the lower-of-cost-or-market method?
a. $18.
b. $20.
c. $21.
d. $22.
Explain your work for both parts to get a thumbs-up.