General Motors is the largest producer of automobiles in the world as well as the world's biggest industrial enterprise. After stumbling in the early 1990s, GM has implemented numerous cost-cutting measures, including downsizing and renegotiating contracts with suppliers. In addition, it has shifted more of its resources to the hot-selling truck market.

The annual report of General Motors Corporation disclosed the following information about its accounting for inventories:

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(a) What is meant by "inventories are stated generally at cost, which is not in excess of market"?

(b) The company uses LIFO for most of its inventory. What impact does this have on reported ending inventory if prices are increasing?

(c) General Motors uses different cost flow methods for different types of inventory. Why might it do this?

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Note 12. Inventories GENERAL MOTORS CORPORATION Notes to the Financial Statements GM General Motors Major Classes of Inventories (in millions) 1994 1993 Productive material, work in process, and supplies Finished product, service parts, etc. $ 5,478.3 $4,671.9 4,649.5 $10,127.8 3,943.2 $8,615.1 Total Memo: Increase in LIFO inventories if valued at first-in, first-out (FIFO) $ 2,535.9 $2,519.0 Inventories are stated generally at cost, which is not in excess of market. The cost of substantially all U.S. inventories other than the inventories of Saturn Cor- poration (Saturn) and GMHE is determined by the last-in, first-out (LIFO) method. The cost of non-U.S., Saturn, and GMHE inventories is determined generally by FIFO or average cost methods.