Testbank Multiple Choice Question 76 Given the historical cost of product Dominoe is $35, the selling price of product Dominoe is $40, costs to sell product Dominoe are $4, the replacement cost for product Dominoe is $41, and the normal profit margin is 20% of sales price, what is the cost amount that should be used in the lower-of-cost-or-market comparison

$35

Explanation:

When using the lower-of-cost-or-market comparison method, we value the product at the lower of the market value or the historical cost amount.

The market value here is the replacement cost which is $41.

The historical cost is $35.

The historical cost is lower so the product will be valued at $35.

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.