In the process of adjusting inventory, how can the lower of cost and net realizable value be applied to the ending inventory?

Question

Quizplus · Accepted Answer

The lower of cost and net realizable value can be applied to the ending inventory by grouping similar or related items and determining the cost and net realizable value for each group. This ensures that inventory is stated at its most conservative value to avoid overvaluing it on the balance sheet.  Using current replacement cost, current sales price, or purchase price alone would not necessarily capture the net realizable value of the inventory. Likewise, applying the rule to the inventory as a whole would not account for potentially different net realizable values within the inventory.

In the Process of Adjusting Inventory, How Can the Lower