What are the three different inventory cost-flow assumptions commonly used in commerce today and allowed by generally accepted accounting principles? How does your company, or a company you are familiar with, determine what cost flow assumption it should use? 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?
· A survey of major U.S. companies revealed that 77% of those companies used either LIFO or FIFO cost flow methods, while 19% used average cost, and only 4% used other methods. Provide brief, yet concise responses to the following questions.
a. Why are LIFO and FIFO so popular?
b. Since computers and inventory management software are readily available, why are more companies not using specific identification?