Which of the following methods of applying the lower-of-cost-or-market rule will result in the fewest write-downs of inventory?
A)The entire stock of inventory in aggregate.
B)Average of cost of goods sold for the past three years.
C)Major classes or categories of inventory.
D)Each individual inventory item.

Question

Quizplus · Accepted Answer

When a company applies the lower-of-cost-or-market rule to the entire stock of inventory in aggregate, items that have market values that are higher than cost will cancel out others that have lower market values, resulting in fewer write-downs.

Which of the Following Methods of Applying the Lower-Of-Cost-Or-Market Rule