Something I realized is that when the company purchases assets at a different price than previously, the inventory system updates the cost of that item in the system to the new price. The issue is that it revalues ALL of the inventory at the new price, not at the lower price. So for instance if we have 2,000kg of bentonite clay that was purchased at $5.0/kg for a total inventory value of $10,000 and then we purchase another 2,000kg at $1.5kg for $3,000, from one perspective we have $13,000 of inventory that could show on the balance sheet. From another perspective we have 4,000kg of clay at $1.5kg = $6,000 kg. So despite spending $3,000 which should increase the balance sheet, there would be a loss of $4,000.
The system as designed uses the new lower number as this is more useful in forecasting future purchases, and it is very technically complicated to track multiple purchase lots for each asset and then doing the proper debits and credits.