Ross Electronics has one product in its ending inventory. Per unit data consist of the following: cost, $24; replacement cost, $22; selling price, $34; selling costs, $5. The normal profit is 25% of selling price. What unit value should Ross use when applying the lower of cost or market (LCM) rule to ending inventory?

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.