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What is the accounting reason that LIFO would lower the bonuses?Is it unethical to use LIFO...

What is the accounting reason that LIFO would lower the bonuses?Is it unethical to use LIFO as an inventory management?Why would you decide to use LIFO or FIFO in accounting for inventory?
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Answer #1

LIFO would result in higher Cost of goods sold and hence lower net income for the company. This will result in income linked bonuses.

It is not unethical to use LIFO as an inventory management as there can be cases when company wants to match recent costs with recent sales.

FIFO is used when inventory costs have been decreasing or the organization believes units sold will be the oldest and matching costs should be considered. LIFO is used when inventory costs are rising and company wants to capture latest costs with sales.

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