Use the Internet to research the annual report of at least three (3) merchandisi

Question

Use the Internet to research the annual report of at least three (3) merchandising companies. Determine the costing method (Last In First Out [LIFO], First In First Out [FIFO], and weighted average) that is used to record inventory. Next, watch C. Pence’s video:

Identify the primary benefits in using the costing method (LIFO, FIFO, and weighted average) that is used to record inventory. Explain at least three (3) reasons that would lead each of your chosen companies to switch to a different costing method.

Explanation / Answer

1 The First-In-First-Out Method (FIFO) This method assumes that the first inventories bought are the firstones to be sold, and that inventories bought later are sold later 2 The Last-In-First-Out Method (LIFO) This method assumes that the last inventories bought are the firstones to be sold, and that inventories bought first are sold last. 3 The Weighted Average Cost Method The weighted average cost method is most commonly used in manufacturing businesses where inventories are piled or mixed together and cannot be differentiated, such as chemicals, oils, etc. Chemicals bought two months ago cannot be differentiated from those bought yesterday, as they are all mixed together.

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