inventory valuation
The dollar amount associated with the goods in a company's inventory.
Initially the cost per unit is the cost to get the inventory items in place and ready for use.
However, under certain circumstances the cost could be replaced by a lower amount.
Since inventory items are constantly being purchased and sold and since the cost of the items purchased often changes, a company must select a cost flow assumption.
The inventory valuation is critical because it also affects the cost of goods sold amount that is matched with sales on the income statement.