Question

Which method of inventory would you choose to use if you were: (1) a CEO of a company just going public and (2) a CEO of a company short on cash?

Provide examples of merchandise which may have a relatively long shelf life as well as examples of merchandise with extremely short lives. Would a retailer or wholesaler want to turn merchandise over rapidly? Why

Answer 1

The basic approach for determining production costs applies the real cost to an individual commodity item. Industries find it easy to adhere to large inventory items such as vehicles when they are bought and marketed. The FIFO (first-in, first-out) costing method assumes that the cost of the first goods bought is that of the products sold if it actually sells the goods. The LIFO theory of production costs (last-in, first-out) states that the charges for the new buying are the first cost of products sold when the company actually buys them. The weighted-average inventory costing method is a way to use a weighted-average unit cost to estimate final inventory. The most common method used to calculate the cost of units which are basically identical is the weighted average method.

(1) CEO JUST GOING PUBLIC:

In the above case, CEO should opt for the Weighted Average method. The average cost procedure assigns costs for inventory products based on the total cost of goods bought or produced during a period divided by the total number of products bought or manufactured.

(2) A CEO OF A COMPANY SHORT ON CASH:

In the above case, CEO should opt for FIFO inventory method. If the inventory cost is going down then FIFO is a better option because it assumes that older less costly items are usually sold first.

There are loads of perks for the retailer to turn into merchandiser. Some of the them are as follows:

• Higher profits.
• Increased Sales
• More satisfied shoppers.
• More engaged buyers (longer on-site time)
• Faster inventory turnover.
• Increased brand loyalty.
• Increased brand recognition