AC114 Unit 9 Discussion 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.
- Jason’s decision to select FIFO appropriate? Is it ethical? Is Jason wrong if this will help the company and also benefit him too?
- What are some of the pitfalls of a company basing a manager’s or CEO’s compensation on the company’s earnings?
- Using the links provided for JCPenney and Macys® (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 6-18 in your textbook.
- Using the links provided for JCPenney and Macys, calculate the number of days in inventory for the companies. What does this ratio tell you about these companies? How do the companies compare? You can reference page 6-18 in your textbook.
Source: The University Record Online: University of Michigan. Retrieved from http://www.ur.umich.edu/0304/Jan19_04/10.shtml
Source: JCPenney. Retrieved from http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-irHome
Source: Macy’s, Inc. Retrieved from https://www.macysinc.com/
AC114 Unit 9 Discussion Inventory Control Methods Answer
Hi,
- Jason’s decision to select FIFO appropriate? Is it ethical? Is Jason wrong if this will help the company and also benefit him too?
Jason should make the right decision for the company and FIFO would lower net income and reduce taxes which depending on the state of the company could be appropriate. It is not ethical of Jason to make the change solely based on his objective being his bonus. Jason would not be wrong if it is what is best for the company.
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