The original cost of an inventory item is above the replacement cost and below the net realizable value. The net realizable value less the normal profit margin is above the replacement cost and the original cost. Using the lower of cost or market method the inventory item should be priced at its
A. Original cost.
B. Replacement cost.
C. Net realizable value.
D. Net realizable value less the normal profit margin.
Answer：A
This answer is correct. Under lower of cost or market, market is replacement cost provided that replacement cost is lower than net realizable value (ceiling) and higher than net realizable value less a normal profit margin (floor). Since the replacement cost is below the floor, the floor will be used as market value. Therefore, original cost will be the value of the inventory because it is lower than the market value (floor). 根據(jù)題干意思，可以寫出以下金額之間的關系：
Replacement cost < Original cost < NRV – profit margin < NRV
Market value = NRV – profit margin > original cost