When materials are stored in inventory for a period of time before being used in the production process, the accounting cost and economic cost differ if the market price of these materials has changed from the original purchase price. Accounting cost is equal to the actual acquisition cost and economic cost is equal to the current replacement cost. After reading the articles “U.S. Car Business in Major Shift” and “Car Making in America”, which cost do you feel the U.S. Car industry (GM, Ford, etc.) is most affected by – accounting or economic cost?
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