How does the choice of inventory valuation method affect

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QUESTION 1)

Selecting the type of inventory system is very important to an organization. How does the choice of inventory valuation method affect the amount of net income reported by a company? In a period of increasing prices, why would the company tax accountant prefer the last in, first out method while the CEO would prefer first in, first out? Why is this important?

QUESTION 2)
Many of us assume that as time passes, the cost of supplies/inventory will go up; therefore, we base our selection of inventory method on this assumption. What if the cost of inventory actually decreases over time, such as in the technology industries? Would you make the same choice of inventory method? Anyone have thoughts on this?

QUESTION 3)
Has anyone noticed how inventory is taken in organizations that are open 24 hours, such as grocery stores? Is this an effective way to take inventory? How do the organizations ensure an accurate count is taken when products are flowing out the door while inventory is being taken?

QUESTION 4)

Technology has also had huge impacts in this area. For example, many companies have adjusted their systems to meet their needs. Is anyone familiar with any companies that have excelled with the JIT model? What challenges do you think they face and how do they overcome them?

QUESTION 5)

Taking inventory requires lots of time and resources. It can even mean closing your business to get the job done. In examples that have been provided, staff is responsible for taking inventory counts. Some companies elect to have outside agencies come in to take inventory. In your opinion, is it better to have staff complete the inventory or an outside agency? Why? Anyone else have thoughts on this?

QUESTION 6)

What information does an organization consider prior to selecting their inventory method? Once a method is selected, it is very difficult to change to another method. Therefore, this decision can have a huge impact on an organization's financial statements. Thoughts, anyone?

Reference no: EM13854118

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