Inventory Control Methods, accounting homework help

timer Asked: Apr 30th, 2016
account_balance_wallet $10

Question description

Inventory Control Methods

Discussion 1: Jason Archer is the CEO of JCPenney® (a United States retailer). Because Jason's bonus is based on the company's earnings, he has directed the controller to use FIFO as the inventory costing method. Jason did not tell the controller his real reason for the directive; instead, he stated that he thought FIFO better reflected the actual flow of inventory costs. Please review the following links and company websites then answer the questions.

  1. Is Jason's decision to select FIFO appropriate? Is it ethical? Is Jason wrong if this will help the company and also benefit him too?
  2. What are some of the pitfalls of a company basing a manager’s or CEO’s compensation on the company’s earnings?
  3. Using the links provided for JCPenney and Sears® (a United States retailer), determine the inventory turnover ratio for the companies. What does this ratio tell you about these companies? How do the companies compare? You can reference page 279 in your textbook.

Source: The University Record Online: University of Michigan. Retrieved from

Source: JCPenney. Retrieved from

Source: Sears Holding Corporation. Retrieved from

Tutor Answer

School: Carnegie Mellon University


Inventory Control Methods
Student name




Question 1
Jason's decision is inappropriate and unethical since as a manager he has no mandate to
change the accounting policies of the firm. Besides, switching to FIFO method is meant to
favour him in terms of bonus and which is disadvantageous to the investor. When FIFO method
is used, the cost of sales will be lower thus higher profits (Wink, 2011). Since the profits will be
higher, the manager will get higher bonus. While the manager will be enjoying higher bonus, he
will be increasing the tax liability of the company as the higher the profits the higher the tax.
Question 2
The manager will tend to manipulate the accounting policies and procedures for their

flag Report DMCA

The best tutor out there!!!!

Similar Questions
Hot Questions
Related Tags

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors