Week 3 Discussion 1 - The controller of Sagehen Enterprises believes that the company should switch from the LIFO method to the FIFO method The

Week 3 Discussion 1 - The controller of Sagehen Enterprises...

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The controller of Sagehen Enterprises believes that the company should switch from the LIFO method to the FIFO method. The controller’s bonus is based on the next income. It is the controller’s belief that the switch in inventory methods would increase the net income of the company. What are the differences between the LIFO and FIFO methods? Guided Response: Analyze several of your peers’ posts. Let at least two of your peers know if a company is better off if it switches from a LIFO method to a FIFO method. Explain your reasoning. In order to understand if the controller of Sagehen Enterprises is about to make a smart switch from the current “LIFO” inventory method to the “FIFO” inventory method, it is important to understand these methods and the impact it has on this specific company. LIFO and FIFO are methods of inventory cost flow assumptions which help to account for the value of inventory once it is sold. LIFO is the current inventory method of the Sagehen Enterprises. This method is based on the assumption of last in, first out. This inventory method bases assumptions that the last goods stocked are the first ones sold. An example of this would be with goods that have short expiration dates such as milk and meat. I am a prime example of LIFO as I tend to choose food items from the back as

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