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<p>[QUOTE=&quot;justafarmer, post: 1155331, member: 3926&quot;]For those who believe the dealer made a profit are mistaken. Profit should be computed on replacement value not original acquisition cost.</p><p><br /></p><p>Example</p><p><br /></p><p>You have an inventory of 100 widgets that you paid $1.00 per widget. Original acquisition cost would be $100.00. At this point in time your net worth is 100 widgets. You price these widgets @ $1.50. and sell them all for $150.00 an amount greater than your original acquisition cost. During this time the value of widgets have doubled. You go to replace your inventory but now they cost $2.00 a piece and you can only buy 75 widgets. You have a realized net loss of 25 widgets.</p><p><br /></p><p>Now let’s look at this in a different way – with the value of widgets going down.</p><p><br /></p><p>You have the same inventory of 100 widgets with original acquisition cost of $100.00. The value of widgets goes down by half to 50 cents. Your net worth is still 100 widgets. You lower your selling price to 90 cents and sell all your inventory for at total of&nbsp; $90.00 - $10.00 below your original acquisition cost. You replace your 100 widget inventory at a cost of $50.00. Now your net worth is 100 widgets plus $40.00 cash. You have a realized net profit equal to 80 widgets.[/QUOTE]</p><p><br /></p>

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