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Why is it necessary for companies to manage their inventory?Businesses that can manage and account for their inventory have accuratedata to make informed decisions. For example, inventory management lets youknow when it’s time to replenish stock, how much product is on-hand forsales, whether theft has occurred, etc. Additionally, you must accuratelyreport inventory so that financial statements reflect the most current andaccurate numbers. These tasks are critical for a business to be successful.Companies can use either a periodic or perpetual inventory system. You willfind that most companies use a perpetual system because it updatesinventory in real time. Think about a retail store. As the product movesthrough the company or warehouse, it is being tracked by the accountingsystem under a perpetual inventory. When the item is purchased at the pointof sale, the system will update the inventory. Small business owners thattypically deal with small amounts of inventory use a periodic system. Mostseasonal businesses also use a periodic system.There are four different inventory costing methods used to help businessesvalue inventory and assign the cost of goods available for sale.* First-in, First-out (FIFO) (most commonly used)* Last-in, First-out (LIFO)* Weighted Average Cost*Specific Identification CostRequirementsChoose one of the following types of inventory before responding to thediscussion questions below.*Food (perishable food items such as dairy or produce)*Medical supplies*Mobile phones or electronic devices*Wine (super premium aged wine or supermarket brand wines)*Petroleum oil or coal*Automobiles*Bridal dressesPlease respond to the following prompts in your initial post:*Identify one of the (inventory) items from the list above.*Do you think businesses that deal with these items use a Perpetual orPeriodic Inventory System? Explain your answer.*Suggest one of the four types of cost flow assumptions for this type ofinventory. Explain why you think this is the best match for the inventoryitems you have chosen.*What accounts are affected? Identify at least two accounts and explainyour answer.*Imagine you are a business owner and you want to sell this type ofinventory overseas. Would you use the same cost flow assumption? Why or whynot?
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