The normal selling price of an inventory/stock item is £21 per unit. The item originally cost £15 per unit, but could only be sold at the normal selling price after modifications costing £5 per unit. The scrap value of the item is £11 per unit. Under the “lower-of-cost-or-value” method the item should be included in the accounts at:     Answers: a.  £16 per unit   b.  £15 per unit   c.  £11 per unit   d.  £10 per unit

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.