Final answer:
The value of the inventory at the lower of cost or market is determined by comparing the cost and market value of each item in the inventory and selecting the lower value. This concept is known as Lower of Cost or Market (LCM).
Step-by-step explanation:
The value of the inventory at the lower of cost or market is determined by comparing the cost and market value of each item in the inventory and selecting the lower value. This concept is known as Lower of Cost or Market (LCM). Let's say we have a class of inventory items, each with its own cost and market value. We would compare the cost of each item to its market value, and whichever value is lower would be used to determine the value of the inventory.
For example, let's say we have a class of products where the cost of one item is $10 and the market value is $15, and the cost of another item is $20 and the market value is $18. In this case, the value of the inventory at the lower of cost or market would be $18, since it is the lower value between the cost and market value of the second item.
To calculate the overall value of the inventory at the lower of cost or market, you would repeat this process for each item in the inventory and sum up the values of the items with the lower cost or market value.