Criteria of inventory pricing

There is no general rule to inventory pricing-the basic principle is that inventory value must express the utility of inventory on hand considered as a part of the circulating capital which is likely to realize revenues. Inventory valuation methods based on this principle are discussed in the paper. The notions of net break up value and current replacement cost are introduced and their relation is shown. The basic cost determination methods (LIFO and FIFO) and their effects are also discussed.