In an annual report, Craftmade International, Inc., describes its inventory accounting policies as follows:

Also in an annual report, Kaiser Aluminum Corporation made the following statement in discussing its inventories:

What accounting principle did Craftmade International follow when it included the costs of freight-in and duties on imported goods in its Inventory account? Briefly describe how a firm determines which costs to include in its inventory account. What accounting principle did Kaiser Aluminum follow when it recorded the \(\$ 19.4\) million pretax charge? Briefly describe the rationale for this principle.

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Inventories are stated at the lower-of-cost-or-net realizable value, with inventory cost determined using the first-in, first-out (FIFO) method. The cost of inventory includes freight-in and duties on imported goods.