Case Study 2.docx - Memorandum TO Evan McLaughlin FROM Will Tarrant DATE RE Different factors to consider for choosing FIFO or LIFO method There are

Case Study 2.docx - Memorandum TO Evan McLaughlin FROM Will...

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Memorandum TO: Evan McLaughlin FROM: Will Tarrant DATE: April 16, 2019 RE: Different factors to consider for choosing FIFO or LIFO method There are advantages and drawbacks to applying both the FIFO and LIFO method to Tangier’s inventory and cost of goods sold. One of the main factors to consider what order of selling the inventory is in the company’s best interest. For example, if the inventory is perishable then the method that should be used is FIFO, because the first units that are in are the first units that are out. Not many inventory products naturally follow the flow of the LIFO method but that does not mean that it cannot be implemented. Beginning with an advantage for the FIFO method, if unit costs are increasing the first advantage is that cost of goods sold will be lower than it would be if the LIFO method is used. This is because when the first units that are on hand are the ones being sold it is assumed that they will be lower than future amounts as the business grows and spends more for its inventory.

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