g. Which inventory method would you recommend for reporting for income tax purposes to minimize taxable income? Why? 3. The company is operating in an inflationary environment. Which method should the company use to maximize inventory valuation? Why? 4. Looking at the purchasing volume versus demand, what guidance would you offer to the operations manager regarding inventory management and cash flow?

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Business

Sherlyn Hendricks

28 October, 04:23

g. Which inventory method would you recommend for reporting for income tax purposes to minimize taxable income? Why? 3. The company is operating in an inflationary environment. Which method should the company use to maximize inventory valuation? Why? 4. Looking at the purchasing volume versus demand, what guidance would you offer to the operations manager regarding inventory management and cash flow?

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Nadia Roman · Answer 1

g. - LIFO as the cost of good sold will be based on the lattest unit thus, the more expensive under inflationary environment.

3. - FIFO as will declare cost the oldest unit (cheapest) and keep under inventory the newest (more expensive) units

4. - It should minimize holding and order cost using the economic quantity order

Then it will have to match their payment cycle with the collection cycle.

It will be better to pay just before 30 days so it pays nominal but after 30 days it will benefit from the inflation thus, it will be like 2% or 3% cheap as inflation per month is abotu that. I would be like paying with discount

Is important to do not led the invoice outdate as the supplier will charge high interest to compensate the inflation (inlation premium)