[TBone]

When calculating the Floor for an LCM problem, what do I use for normal profit margin?

The ninja notes show [NRV – (Cost x Normal Profit Margin)] = Floor

CPAExcel shows [NRV – (Selling Price x Normal Profit Margin)] = Floor

Am I missing something here?

FAR: 66, 75
AUD: 67, 69, 70, 74, 74
REG: 71, 79
BEC: 73

[sbarrientos]

The Floor should be calculated as [ NRV – (selling cost * profit margin) ] according to Becker.

Hope this helps.

AUD : 66 , 71 (another!!!) , 88
FAR : 90
BEC : 80
Don't give up.

[M.O.D.]

The price at which the price will sell is NRV, say $100

The profit margin is the amount of profit the company will make upon selling the product, say $10.

So NRV- profit margin = 100-10 = 90

It is never used as a formula, but as a dollar amount which is compared with other dollar amounts, namely NRV (without the profit margin), replacement cost, and then carrying cost. None of those are formulas either.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Anonymous]

Lower of cost or market

Market = Middle cost between:

Replacement cost

NRV (Selling price minus cost to sell/dispose) – Ceiling

NRV minus Normal profit margin – Floor

[TBone]

I know the formula but in a problem when a percentage is given for the normal profit margin as opposed to a dollar value, you have to figure out the dollar value to subtract form NRV.

In the FAR ninja notes it shows NRV – (Cost * Normal Profit Margin %) = Floor

My understanding is it should be NRV – (Selling Price * Normal Profit Margin%) = Floor

Basically I'm saying there is a mistake in the ninja notes. I just want someone to confirm so i don't remember the wrong thing and screw it up later.

FAR: 66, 75
AUD: 67, 69, 70, 74, 74
REG: 71, 79
BEC: 73

[Anonymous]

Normal profit are normally given in the question as dollar amount. If that's not the case, you should calculate the profit margin based on what info is given, it can either be based on cost or selling price. I guess posting the question will help.

[Author]

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