FIFO Case Study

Hi LaTonya,

Your discussion provides an excellent approach to LIFO and FIFO methods. During this week's review; we reviewed each method and discovered how they operate. Also, we were tasked to discuss our thoughts on if a company is better off if it switches from a LIFO method to a FIFO method. Initially, I thought LIFO would be the better move for a company. However, after continued research and further review, I would say a company would be better off changing to the FIFO method. Operating under this method comes with the good and bad depending on the sale of the goods. Take, for example, the cost of goods first purchases would have been less when the products were first bought, and as time went on price probably increased as more merchandise was purchased. Therefore, the cost of goods sold under FIFO will have a higher profit since the older items are sold first. Another plus is with restrictions which are less likely to be imposed under this method. What your thoughts on if a company is better off on LIFO or FIFO?

Hi Maurius,

Your discussion provides an impressive view of this week’s discussion on LIFO and FIFO methods. I appreciate your detail to great

FIFO (first in first out method); is reported by taking the first purchases bought based on the number of units sold multiplied by the price unit. In this situation the items acquired first are cheaper and then the cost continues to rise for price per unit. Thus, the ending inventory is what is left over which has a higher cost of price per unit.

On the other hand, LIFO (last in, first out method); is reported by taking the last purchases bought based on the number of units sold multiplied by the price per unit. Furthermore, the items acquired last are more expensive and have a decrease in price per unit. Thus, the ending inventory has a lower value of left over since the cost of price per unit has decreased.

Lisa