The ceiling, or the maximum market amount at which inventory can be carried on the books, is equal to

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The ceiling or maximum market amount at which inventory can be carried on the books is equal to the net realizable value. Net realizable value is the estimated selling price less the estimated cost of completion, disposal, and transportation. It is the amount that a company expects to receive from the sale of their inventory, and therefore represents a more conservative valuation of the inventory than selling price or current replacement cost. Historical cost is the original cost of the inventory, which becomes less relevant over time as market conditions, supply and demand, and other factors change.

The Ceiling, or the Maximum Market Amount at Which Inventory