What is the proper application of the lower of cost or marke

What is the proper application of the lower of cost or market to value inventory? 1--Apply the method to the inventory as a whole. 2--Apply the method to each item in inventory. 3--Apply the method to the average cost of items in inventory. 4--Apply the method to the items of inventory that exceed the average cost of the inventory as a whole.

Solution

The lower of cost or market to value inventory should be applied to each item in inventory. Option 2 is correct