Chapter 8, Problem 1MC

Sienna Company uses the FIFO cost flow assumption. Sierra has inventory with a selling price of $100, packaging costs of $5, and transportation costs of $10. Sienna’s normal profit margin is $20. However, due to limited supply of the product from the manufacturer, it would cost Sienna $80 to replace the inventory. What amount should be used as the market value?

1. a. $65
2. b. $80
3. c. $85
4. d. $100