The choice of inventory valuation method can help achieve each of the following independent goals, except:

Question

Quizplus · Accepted Answer

Inventory valuation methods do not directly affect the cost of goods acquired from suppliers. The best choice will depend on the specific goal to be achieved. If the goal is to increase reported profit for the period, the FIFO (First-In, First-Out) method may be the best choice, as it assigns the highest values to the most recent inventory purchases. If the goal is to increase inventory turnover rate, the LIFO (Last-In, First-Out) method may be preferred, as it assigns the highest values to the oldest inventory purchases. If the goal is to reduce the amount of income taxes owed, the lower of cost or market (LCM) method may be the best choice, as it values inventory at the lower of its cost or current market value.

The Choice of Inventory Valuation Method Can Help Achieve Each