ACC 291T University of Phoenix Wk 2 Employee Ethics Discussion

Post a total of 3 substantive responses This includes your initial post and 2 replies to other students.

An executive in a merchandising company receives an annual bonus equal to 5% of net income. Historically, the company has calculated cost of goods sold and ending inventory using LIFO and has maintained 30,000 of units in inventory for the last ten years. The executive is recommending the company reduce the number of units in year-end inventory to 1,000. Over the ten-year period, the cost per unit of inventory has increased from $60 per unit to $110 per unit.

Respond to the following in a minimum of 175 words:

  • In what ways would a reduction in inventory help the company?
  • In what ways would the change from LIFO to FIFO help the executive personally?
  • Would you approve the proposal to move from LIFO to FIFO? Why, or why not?

Reply to at least 2 of your classmates. Be constructive and professional in your responses.

Student 1

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Hello Everyone,

If the company has calculated the cost of goods sold and ending inventory using LIFO and has maintained 30,000 of units in inventory for the last ten years then that is a very good thing for the company to recommend that the company to reduce the number to 1000. And raising the cost will from $60 per unit to $110 per unit is also a good thing because the company would get more in their profit. The reduction in inventory would help the company have less units at the end of the year. There would not be so many units that was not sold at the end of the year. So changing from LIFO to FIFO would help the company in serval ways. They would get bigger a bonus and make a bigger profiteer the company. So yes I would absolutely approve this proposal to move from LIFO to FIFO. All because of the profits and bonuses that the company will come into after the big approval of the proposal. Everyone wins the company makes a bigger profit and the executives get bigger bonuses.

Student 2

Top of Form

A reduction in inventory could lower cost of goods sold, thus increasing income. Plus, having a lower number of items in inventory, means money can be generated faster. Reducing the number of items purchased or held on to at the end of the year, can help keep more funds in different accounts.

As for changing from LIFO to FIFO, it will help put a little extra money in the executives pocket. If he receives an annual bonus of 5%, he is guaranteed money. Switching to FIFO, could mean anywhere from a couple hundred dollars to a couple thousand. Making the switch would be a smart decision for the executive and the company. I would approve the proposal. This could mean more net income at the end of a reporting period. Who would turn down more income for a company? I think it is a good decision, as older inventory with a lower cost is earning more profit when sold, at a higher sales price. With sticking to LIFO, you runt he risk of continually earning less income, and items with a higher purchase price are being sold first.

Prof. Angela


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