Inventory valuation at lower of cost or NRV affects gross profit via COGS Steps:

• Damaged inventory should be valued at lower of cost or net realizable value (NRV), where NRV = selling price ($9) - repair costs ($2) = $7 per unit.
• Original cost per unit is not provided, so write-down amount (cost - $7, if cost >$7) cannot be calculated for 10 units.
• Incorrect valuation at cost overstates ending inventory if cost > NRV, understating COGS and overstating gross profit by the write-down amount.
• Repairs occur after valuation, so no offset in current year; effect on net profit same as gross profit.

Not enough information to determine exact effect or confirm B.

Why B is correct:

• Cannot verify; lacks original cost to compute $50 overstatement.

Why the others are wrong:

• A: $30 arbitrary without cost data.
• C: No basis for understatement in gross profit.
• D: No basis for understatement in either.

Final answer: Not enough information.