Per the video summary, there are three (3) primary inventory costing methods used by companies: LIFO, FIFO, and Weighted Average. With each method comes a number of pros and cons that a company must consider when implementing its inventory management strategy. Select a company below and discuss the advantages associated with its chosen inventory costing method.
Inventory Accounting Policy Inventories, consisting of products available for sale, are primarily accounted for using the rst-in, rst-out method, and are valued at the lower of cost and net realizable value. This valuation requires Amazon.com to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category.
Amazon.com provides Fulllment by Amazon services in connection with certain of the sellers’ programs. Third-party sellers maintain ownership of their inventory, regardless of whether fulllment is provided by Amazon.com or the third-party sellers, and therefore these products are not included in the inventories. Amazon.com also purchases electronic device components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for the products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate supply, Amazon.com enters into agreements with contract manufacturers and suppliers for certain electronic device components. A portion of Amazon.com’s reported purchase commitments arising from these agreements consists of rm, non-cancellable commitments. These commitments are based on forecasted customer demand. If Amazon.com reduces these commitments, Amazon.com may incur additional costs.
Amazon.com also has rm, non-cancellable commitments for certain products offered in the Whole Foods Market stores. Source: Amazon.com Inc., Annual Report Inventory Disclosure Amazon.com Inc., Statement of Financial Position, Inventory Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Inventories 16,047 11,461 10,243 8,299 7,411 Source: Based on data from Amazon.com Inc. Annual Reports Item Description The company Inventories Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer). Amazon.com Inc.’s inventories increased from 2015 to 2016 and from 2016 to 2017
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