explain why ford management chose to use lifo for certain of its inventories 555628

Analyzing Notes to Adjust Inventory from LIFO to FIFO The following note was contained in a recent Ford Motor Company annual report:

NOTE 8. INVENTORIES—AUTOMOTIVE SECTOR
Inventories at December 31 were as follows (dollars in millions)

Current Year

Previous Year

Raw material, work in process, & supplies

$3,016

$4,360

Finished products

6,493

6,861

Total inventories at FIFO

9,509

11,221

Less LIFO Adjustment

891

1,100

Total

$8,618

$10,121

Required:

1. What amount of ending inventory would have been reported in the current year if Ford had used only FIFO?

2. The cost of goods sold reported by Ford for the current year was $127,103 million. Determine the cost of goods sold that would have been reported if Ford had used only FIFO for both years.

3. Explain why Ford management chose to use LIFO for certain of its inventories.

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