The Algorithm for Lower-of-Cost-or-Market Inventory Valuation: Mathematical Notation Makes it Easy.

Abstract This article presents information on Inventory Valuation. The rule for valuing inventory by lower of cost or market is given in Statement 6 of Chapter 4 of Accounting Research Bulletin No. 43. As used in the phrase "lower of cost or market," the term "market" means current replacement cost by purchase or by reproduction, as the case may be except that, Market should not exceed the net realizable value i.e., estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal and Market should not be less than net realizable value reduced by an allowance for an approximately normal profit margin.