Abstract The article informs that one of the most difficult rules for students of accounting to comprehend is the pricing of inventory items at "cost or market whichever is the lower." Because the application of this rule lends itself to numerical calculation, much classroom time is often devoted to the topic, and many texts include numerous examples in attempting to illustrate the procedure. The confusion for the students stems largely from the complex definition of "market" given in Accounting Research Bulletin No. 43. The limitations on market contained in the definition are often referred to as "ceiling" and "floor" respectively. Per- haps this terminology has contributed to the misunderstanding, as one who has not carefully studied the above definition may feel uncomfortable about valuing inventory items at cost in cases where cost is less than "floor." Of course, the "floor" constraint pertains only to the determination of "market" and should not be applied to cost.
Allan R. Drebin (Wed,) studied this question.