what is other inventory valuation method

I have a food vending business. I am being asked for additonal information about other inventory valuation method. I don't know what they are looking for.
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    Lower of Cost or Market Value
    is the most common method actually used
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    Specific cost (COST) - includes the actual cost of merchandise or materials, plus any acquisition costs, such as shipping.

    Lower of cost or market value - you may use market value if it is lower than cost at the inventory date (usually the last day of your tax year). Also, you must apply the comparison to each individual item in inventory.

     Check "Other" if you use a method other than these two, such as the Retail method (can be used only by retail businesses) and the Perpetual or Book method.

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    Ending Inventory
    Inventories help determine the cost of goods sold. The method you select to identify and value your inventory affects your taxable income.

    The higher your cost of goods sold, the lower your taxable income will be.

    The IRS requires you to use the accrual method of accounting for your inventory. To change your accounting method, you must first file Form 3115 (Application for Change in Accounting Method) with the IRS. You can request Form 3115 (Application for Change in Accounting Method) from the IRS.

    Before determining the value of your inventory, you must identify the inventory you have on hand using one of these three methods:

    Specific - each item is matched with its actual cost. If you cannot do this, you must use FIFO or LIFO.

    FIFO (First In, First Out) - assumes the first item purchased or produced is removed from inventory first. This method is most effective when prices are falling because it increases your cost of goods sold.

    LIFO (Last In, First Out) - assumes the last item purchased or produced is removed from inventory first. This method is most effective when prices are rising, because it also increases your cost of goods sold.

    Include in inventory all finished or partly finished goods acquired for sale.
      -Include all merchandise in which you have vested title, including inventory items in transit to which you have title. If title has already passed to the buyer, do not include these items in inventory.
      -Include items out on consignment.
      -Include items under contract for sale, but not yet segregated and applied to the contract.

    Once you have identified which items you have left in your inventory, you need a method to value the inventory. Whichever method you use, it must be applied to your entire inventory. There are two common methods used to value inventory:

    Specific cost (COST) - includes the actual cost of merchandise or materials, plus any acquisition costs, such as shipping.

    Lower of cost or market value - you may use market value if it is lower than cost at the inventory date (usually the last day of your tax year). Also, you must apply the comparison to each individual item in inventory.

     Check "Other" if you use a method other than these two, such as the Retail method (can be used only by retail businesses) and the Perpetual or Book method.

    When you tally your inventory, don't forget to account for inventory that is damaged, obsolete, or imperfect. You can increase your cost of goods sold by valuing this inventory at selling price less direct cost of disposing this inventory (but not less than scrap value).

    Adjustments may be made due to the following events:

    * Removal of items sold and delivered
    * Removal of items for personal use
    * Removal of items that have been lost through casualty or theft
    * Removal of items converted to non-saleable status, such as a computer used exclusively as a demonstration item
    * Removal of items given away as samples
    * Donation of items

    The Uniform Capitalization Rules may also apply if:
      -you are a reseller of goods (and your gross receipts for the past three years are more than $10 million each year);
      -you manufacture goods or construct or produce real estate for sale to customers; or
      -you produce or manufacture real or tangible personal property for use in your trade or business, even though you don't sell the property to others.

    The Uniform Capitalization Rules require additional capitalization of certain indirect costs, such as, repair and maintenance on assets used in the manufacturing process.

    Farming: Farmers can use special accounting methods to value inventory.

    For more information on how to account for inventories, see Chapter 6 in IRS Publications 334 and 538 (Accounting Periods and Methods).

    NOTE: Beginning in 2000, if your business has average gross receipts for the 3 prior tax years of $1 million or less, you may be eligible to adopt or change to the cash method of accounting. If you make this change, you will not be required to account for inventories. Instead, you may treat inventory in the same manner as cost of materials and supplies that are not incidental. To make this change you must file Form 3115. See government instructions and Pub. 553 for more information.
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