Lower of cost and net realizable value
A) is most conservative if applied to the total inventory.
B) is most conservative if applied to major categories of inventory.
C) is most conservative if applied to individual items of inventory.
D) must be applied to major categories for income tax purposes.

Question

Quizplus · Accepted Answer

Lower of cost and net realizable value is most conservative when applied to individual items of inventory because it ensures that each item is valued at no more than its expected selling price minus the costs necessary to bring it to that selling price. This approach provides a more accurate representation of the inventory's value in cases where certain items may be facing specific market conditions that affect their expected selling price.

Lower of Cost and Net Realizable Value