Why this is mistaken
An inventory index measures a price relationship for a defined pool. Divide the current-cost pool by the index before comparing quantity represented by its base-year cost. A higher index can reduce the base-year amount when the current- cost balance stays fixed. The pool data and index scope, rather than the index level alone, support the quantity conclusion.
Where to watch
When this mistake may appear
- The index rose, so inventory quantity rose.
- Any increase in current-cost inventory creates a new layer.
- A consumer price index can be used for any inventory pool.
Check your work
Your work may contain this mistake if:
- Infers a quantity change from an index or current-cost balance without converting the same pool to base-year cost.