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The example below is an example for lower of cost or market. I am just wondering, for normal profit margin, shouldn’t it specify whether it is based on sales or on cost? Cause that would change the floor number.
Lower of Cost or Market
Cost: $50
Replacement Cost: $55
Selling Price: $75
Selling (including Disposal) Cost: $2.50
Normal Profit Margin: 25%
NRV = $75 – $2.50 = $72.50
Replacement Cost = $55
*****NRV – Normal Profit Margin = $60*****
*****[$72.50 – ($50 Cost x 25% = $12.50)]*****
NRV = $72.50
NRV-Normal Profit Margin = $60 = Market
Replacement Cost = $55
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