writing assignment

writing assignment - According to Jeffrey Gramlich LIFO...

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“Costs and prices regularly fall every year in the microcomputer industry. Briefly indicate your recommendation and rationale for an inventory method for a firm about to enter this industry.” Selecting an inventory method that provides tax minimization and profit maximization is essential for accountants and top management. One of the biggest challenges is to forecast the cost behavior within several accounting periods, which would allow managers to make accurate decisions about which inventory method to use for their company. The two most popular inventory method types are LIFO (Last-in First-out) and FIFO (First-in Firs-out).
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Unformatted text preview: According to Jeffrey Gramlich, LIFO produces lower gross income and lower tax liability during periods of rising costs and stable or increasing inventory levels. In order to find an inventory method that would minimize the tax liability for a firm about to enter the microcomputer industry, we need to evaluate the cost behavior in the specific industry. If the costs are regularly falling, then we could recommend FIFO, because the firm would get rid of the most expensive items first and would reduce their gross income by reporting a higher cost of goods sold, this would lead to a lower tax liability....
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