Inventory Costing Methods Wal-Mart Uses The Last I

Inventory Costing MethodsWal-Mart uses the Last in First out (LIFO) inventory method, Amazon.com uses first in first out (FIFO); Adidas uses weighted average cost method to record inventory.Benefits of using LIFO The LIFO method provides a superior measurement of earnings because matching recent costs to current revenues. This way it earnings fairly represent the replacement cost of goods sold and eliminates profit that may result from undervalued inventories.LIFO method evens out profit that may result from inflation during periods of rising prices. Companies using LIFO method have fewer inventories at current higher prices as under this method, most recent inventory often higher cost is sold first. This takes care of write-downs to market in future due to decline in inventory prices as these are minimized or eliminated under LIFO.Benefits of using FIFOFIFO helps prevent obsolete inventory by using the inventory first received before using newer inventory. The FIFO inventory method is simple and easy to understand and operate. During periods of deflation (falling prices) FIFO method is more realistic in matching current costs to revenues.Benefits of using weighted average Weighted average inventory method allows the use of one consistent figure across all inventories instead of calculating different costs. This