Problem 6-4A (Algo) Report inventory using lower of cost and net realizable value (LO6-6)

A local Chevrolet dealership carries the following types of vehicles:

Inventory Items Quantity Unit Cost Unit NRV

Vans 3 $22,000 $20,000

Trucks 6 $17,000 $16,000

2-door sedans 2 $12,000 $14,000

4-door sedans 7 $16,000 $19,000

Sports cars 3 $32,000 $35,000

SUVs 5 $28,000 $23,000

Because of recent increases in gasoline prices, the car dealership has noticed a reduced demand for its SUVs, vans, and trucks.

Required:

Compute the total cost of the entire inventory.

Final answer:

The total cost of the entire inventory is $540,000.

Explanation:

To compute the total cost of the entire inventory, we need to multiply the quantity of each type of vehicle by its unit cost and then sum up the results.

For vans: 3 * $22,000 = $66,000

For trucks: 6 * $17,000 = $102,000

For 2-door sedans: 2 * $12,000 = $24,000

For 4-door sedans: 7 * $16,000 = $112,000

For sports cars: 3 * $32,000 = $96,000

For SUVs: 5 * $28,000 = $140,000

Summing up the costs, the total cost of the entire inventory is $540,000.