Inventory Method

InventoryMethod

Thereare different types of inventory methods, and their applicationdepends on the merchandising operation of a particular company. Mycompany of choice is the PepsiCo Inc., which has its headquarters inNew Yolk. This firm deals with the manufacturing of food, snack, andbeverages internationally. These products will have to be distributedfrom the company to its customers within the shortest time possiblesince they are perishable.

Ibelieve that the inventory method that best suits this company is theFIFO (first in, first out). This is because the company incorporatesa risk of obsolescence. PepsiCo deals with food products andbeverages that go bad easily if they are left in store for a longtime. It is wise if the oldest stock is sold first to reach theesteemed customers before their expiry date. Thus, the possibility ofthem decaying will be minimized, and they can be consumed while stillfresh.

Infact, this is the best technique if the prices are expected toincrease or decrease depending on the nature of the market in theindustry. The remaining inventory will be recorded in the most recentprice or any other figure that is close to it. The accountants of thecompany will not encounter any problems when preparing the financialstatements because of the effects of factors like inflation thataffects the prices of goods. The costs that are used in productionwill match the most recent sale value.

Lastly,it is normal that the enterprise can incur losses if this approach isnot applied. To avoid this, FIFO is the only solution that willensure that the company maintains its revenues.

Therefore,the correct method of inventory should be adopted to match the typeof transactions suitable for enterprises.