The U. S. GAAP lower of cost or market rule for inventories may be applied to total inventory, to groups of similar items, or to each item. Which application generally results in the lowest inventory amount?

The inventory has to be recorded separately to each item and this will generally result in the lowest inventory amount.

Explanation:

LCM- the Lower of Cost which is also called as Market rule is the theory for valuating the inventory in accounting. According to the LCM rule, in a business the cost of inventory must be recorded at lower cost (it can be either the current market price or the original cost)

Reason for recording at lower cost:

Aggregating the items results in the incorporation of some items at amounts greater than LCM.

Example:

If product X (cost = 2 dollars, market = 1 dollar) and product Y (cost = 3 dollars, market = 4 dollars) are aggregated for LCM, the inventory measurement will be 5 dollars. If the rule is applied separately to both the products, the LCM measurement will be 4 dollars.

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.