Zinhle is the management accountant for a company that manufactures electronics in South Africa....
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Zinhle is the management accountant for a company that manufactures electronics in South Africa. The company currently uses the firstIn firstOut FIFO method for inventory valuation, but the finance director is considering switching to the lastIn firstOut LIFO method, due to the rising costs of raw materials. Zinhle asks for your assistance in preparing a short response to the finance director explaining the possible effect of switching from FIFO to LIFO on the companys financial statements. Make use of an example of your own to illustrate how the cost of goods sold and ending inventory would differ under each method.
Zinhle is the management accountant for a company that manufactures electronics in
South Africa. The company currently uses the firstIn firstOut FIFO method for
inventory valuation, but the finance director is considering switching to the lastIn firstOut LIFO method, due to the rising costs of raw materials. Zinhle asks for your
assistance in preparing a short response to the finance director explaining the possible
effect of switching from FIFO to LIFO on the companys financial statements. Make
use of an example of your own to illustrate how the cost of goods sold and ending
inventory would differ under each method.
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