current cost Ralph manages a consumer products outlet. Inventory is important. Customers will not return if the outlet is out of stock; and inventory carrying costs are far from trivial. Changing prices are also an issue.

At present the historieal eost of the outlet's inventory is 2,036,000 (based on UFO), while the eurrent eost of the inventory is 2,345,000. A eompensation eonsultant has suggested Ralph be evaluated on the basis of eurrent cost performance, where inventory would be valued at eurrent eost and holding gains would be recognized as income. Ralph is suspidous, since this will add to the income measure' s volatility.

Carefully discuss the use of current eost measures in the evaluation context. Do you see any eonnection with the way GAAP handies foreign eurrency translation?

AppendixLO1