Question

If you were a manager of the dairy department of a grocery store, would you implement the LIFO or FIFO inventory management method when it comes to stocking gallons of milk? Please explain your rationale.

Answer 1

First of all, Milk is a peritiable product. We can not store milk large span of time. We can not separate milk which is purchased today and milk purchased yesterday without storing them separately. If we stored milk in one container we can not separately identify them which portion of milk purchased earlier and portion of milk purchased later. So We can not apply LIFO and FIFO as well as Specific identification method of cost flow. Life span of milk is very low. It is practically very difficult or not possible to apply LIFO or FIFO method for milk. Average Cost method or Weighted Average Cost Inventoy Method can be used for products like milk.