Abstract This article presents information on Inventory Valuation. The rule for valuing inventory by lower of cost or market is given in Statement 6 of Chapter 4 of Accounting Research Bulletin No. 43. As used in the phrase "lower of cost or market," the term "market" means current replacement cost by purchase or by reproduction, as the case may be except that, Market should not exceed the net realizable value i.e., estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal and Market should not be less than net realizable value reduced by an allowance for an approximately normal profit margin.

Abstract The article assesses the feasibility and desirability of adopting a report issued by the Study Group on Introductory Accounting titled "A New Introduction to Accounting." An analysis of the recommended modules and topics reveals that many of the subject-matter suggestions are not really innovative. Consequently, any discussion of the feasibility and desirability of adopting the Study Group's recommendations can be limited to the specific suggestions that would require significant revision of the traditional first-year accounting curriculum. Given the imposed school-calendar and classroom-time constraints, it appears that only the first three innovations listed in the article can be feasibly adopted. If much less time is devoted to the discussion of bookkeeping procedures, the instructor should be able to greatly increase the emphasis placed on the use of accounting data in resource allocation decisions. If it is conceded that non-accounting majors do not need exposure to such topics as closing entries, trial balances, work sheets, and special journals, then it must be concluded that at least 80%of the class benefits by the shift in emphasis.

Abstract The article focuses on the source of the conflict between present-value depreciation and interperiod tax allocation techniques for determining balance sheet values in accounting practice. A major portion of the controversy over the appropriate treatment of income taxes in accounting results from disagreement on the nature of income taxes. Even if one accepts the unproven assumption that income taxes are an expense, the question of the relationship between income taxes and asset valuation remains to be answered. Supporters of tax allocation, on the other hand, regard asset valuation and income tax accounting as separate problems. The impact of income taxes during a specific accounting period should be measured by the amount of tax which will be paid on income earned and reported during that period, regardless of when the taxes are paid. The article concludes that the basic benefits associated with present-value depreciation can be realized under existing tax laws and accepted methods of accounting for income taxes if annual depreciation charges are based on pre-tax income streams.

Abstract The article discusses stationarity economic problems associated with the use of market model of security price behavior. A table presented in the article indicates the percentages of variance in the logarithms of monthly price relatives for 94 stocks. The findings indicates that the signs or magnitudes of residuals are caused by any factors other than a poorly specified model. The authors of the article did not intent to suggest that the use of the market model in measuring the effect of accounting numbers on individual stock prices should be abandoned.

Abstract This article presents information on the accounting research program and how accounting inquiry must be directed toward understanding human purposes. Accounting research has a variety of powerful techniques for systematic analysis. Statistics, economics, operations research, behavioral science, and other disciplines have furnished tools that excel in rigorous investigation. Those tools can force implicit concepts into explicit form and establish the circumstances in which the concepts are valid. They can test the internal consistency of a variety of propositions. They can systematically explore the range of possible outcomes resulting from specified acts. In short, the techniques of accounting research excel when analysis is to be rigorous, logical, and systematic. The choice, however, between intuition and research in accounting inquiry is false they are complementary rather than competing. Decisions in accounting, as in other human endeavor, depend primarily on the inarticulate background knowledge of seasoned men, and it does not follow that research has no role. To the contrary, explicit information that has been subjected to systematic analysis should be carefully considered by a decision maker lucky enough to have it available.

[This paper develops an iterative procedure for estimating "specific" and "income" consumer unit scales in Engel curve analysis. The proposed procedure is essentially a modification of the Prais and Houthakker method and is illustrated by means of a numerical example based on the Indian National Sample Survey data.]

Ten years ago Harvey Averch and I developed a model of the firm's behavior under the constraint that the return on capital investment not exceed a given level, specified by a governmental regulatory body. Major assumptions of the model are that (a) the firm seeks to maximize profit, (b) the market cost of capital is constant, (c) the allowable or fair rate of return exceeds the cost of capital, and (d) no regulatory lag exists. Under these assumptions the model leads to conclusions that the capital-labor ratio is greater than that which would minimize cost at the level of output selected by the firm, and that the firm may have an incentive to serve competitive markets even if revenues fall below incremental cost in those markets, with the difference more than compensated by increased net revenues permitted through price increases in its monopoly services. This formulation has attracted numerous comments, critiques, and replies. However, virtually all the discussion has remained on theoretical grounds. Unfortunately, little empirical analysis has appeared to suggest the importance of these distortions in the real world. The purpose here is briefly to note major developments in the theory, to examine bits of evidence that have come to light, and to address possibilities for further empirical work.

This Committee the Association's Committee on Economic Education is charged to help improve the teaching of economics. This is obviously a many-faceted problem, and at most a committee like this can expect to play only a modest role in prodding, stimulating innovation, encouraging, and providing help on some fronts. During the past decade the Committee has attempted especially to stimulate research on the effectiveness of alternative teaching approaches, to stimulate attention to the teaching process, and to raise the prestige of teaching at the college level. These attempts are documented elsewhere.1 Building on them, we now suggest some next steps.

In a recent issue of this Review, Philip Coelho and Moheb Ghali have argued that various studies purporting to show a persistent differential between wages in northern and states have used data unadjusted for regional differences in price level; that the differential has been proved for nominal wages, not real wages. Using data for 1963 they show that the average nominal wage rate for a sample of five northern metropolitan areas is significantly greater than such an average for five southern metropolitan areas. However, after the nominal wage figures are adjusted for differences in the cost of living in each of the ten areas, this differential disappears. This result survives the introduction of dummy variables to account for differences in industry composition, sex, color, and capital-labor ratio. It seems almost unbelievable that earlier studies of the wage differential have ignored regional differences in price levels, and Coelho and Ghali must be commended for calling attention to this anomaly. However, they have not proved the end of the NorthSouth wage differential; at least not to the satisfaction of this writer. The reason is that of the five cities used in their sample, only one, Atlanta, would be accepted by many as southern, the classification of Baltimore, Dallas, Houston, and Washington, D.C. as by the Departments of Labor and Commerce notwithstanding.' The purpose of this note is to repeat Coelho and Ghali's comparisons for another sample of cities, half of whose members would be recognized as by any reasonable observer.2 Required data for each metropolitan area are number of production workers, total man-hours, and total wages for production workers, classified by industry, and cost of living indices. The first three items are provided in the Census of Manufactures 1967 and the latter can be obtained for the year 1967 from the Handbook of Labor Statistics 1970. Table 1 shows that our sample seems to give roughly the same results as that of Coelho and Ghali. Average hourly nominal wages for the five northern areas are 14.4 percent higher than for the areas. This differential drops to 4 percent when real hourly wages are considered. The same phenomenon occurs for annual wages. Looking at the figures for the individual cities however, it is clear that Baton Rouge is an extreme outlier. If we compare average hourly wages between the five northern areas and the four areas excluding Baton Rouge, we find that when we shift from nominal to real wages the percentage difference drops from 25.6 to 15.1, still a sizeable difference. It would be preferable to establish the continued existence of the North-South wage differential without excluding Baton Rouge from the sample. This might be accomplished by showing that the high average wages in Baton Rouge are a result of the industrial composition of that region. Our method of distinguishing between regional effects and industry effects is identical to that of Coelho and Ghali. We calculate wage rates and annual wages for every industry (two digit classification) and for every metropolitan area.3 The model takes the form: * Assistant professor of economics, Michigan State University. I The title of one of the sessions at the December 1971 meeting of the American Economic Association, at which two papers were presented, was Is the South Still Backward? M. I. Foster included only Atlanta in his definition of the South. F. Ray Marshall omitted Baltimore and Washington, D.C. from his definition. 2 We do not repeat the last part of their analysis involving regional differences in sex, color, and capitallabor ratio. 3 No observations were available for the following industries in: Boston, SIC 21; Buffalo, SIC 21, 31; Pitts-

Recently in this Review, Charles Goetz and James Buchanan advanced the proposition that output-generated external diseconomies may be associated with a production possibilities curve internal to an attainable curve and that under competition it would be the former on which equilibrium would occur. This in turn they take to imply that the conventional tax-bounty analysis offers, in general, an incorrect remedy in that it applies to the wrong production possibilities curve. The present discussion does not deny that the results indicated by Goetz and Buchanan occur, as they too note, in the context of input-generated external diseconomies nor that their results may be conceivable in the context of output generated external diseconomies.' We do however denv that the analytical structure they offer in support of their conclusion is admissible. The analytical case Goetz and Buchanan make is, in terms of Dean Worcester's classification, that of Externalities which are internal to a specific (p. 884). They employ the crucial specification, on which their results turn, that the costs of each firm (where firms are identical) depend on a function which includes the output of other firms, as distinct from total industry output, as an argument. Where ci, qi, Qi are, respectively, firm total cost, firm total output, and output of all other firms corresponding to any particular firm, i, we have