If a company applies the lower-of-cost-or-market rule on an aggregate basis, its write-down of inventory is likely to be lower than if it applies the rule to individual items of inventory.

Question

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If a company applies the lower-of-cost-or-market rule on an aggregate basis, items of inventory with higher market values compared to cost will offset items with lower market values. As a result, the write-down is likely to be lower, if it is needed at all.

If a Company Applies the Lower-Of-Cost-Or-Market Rule on an Aggregate