LIFO vs. FIFO (Last In/First Out versus First In/First Out)tubaman5150 wrote:Here's my question:
I know that dealers will always pass on the price increase from the manufacturer to the consumer (due to our widening exchange rate).
But what about the inventory that the dealer already purchased at the old price? Most dealers only receive tuba shipments a few times a year. I've seen very little hesitation by some dealers to go ahead and sell products, purchased at last quarters prices, and mark them up with the new stock. I suppose its not necessarily a bad way to do business, but it makes it hard on someone (like me) who wants to buy a new miraphone.
Darn it.
Also, because a business like WWBW is a continuous business, in fact a corporation, with its own lifespan, they would best be suited to sell inventory based on replacement costs.
When pricing use LIFO. This protects your profit margins on items with volatile pricing. When accounting and financial reporting, use FIFO (a lot of firms do) to reflect maximum profit. Few firms use a cost average, because it generally takes too much effort to maintain and verify a running average.
Anyhow, I have to agree with Chuck on the inflation issue. If you want to buy any goods, foreign or domestic, do these purchases soon, especially if they require financing. We are properly set up to incur mid to late 1970's type inflation figures. In addition to the Chinese about to let their currency float freely, we have limited resources to combat inflation because Fed rates are so low. Clarinet playing Greenspan has been trying to move these rates up to give himself some room, but I fear that the rates won't be in the proper place in time.
Yeah, If you are even thinking about buying a foreign made tuba, financing makes a lot of sense right now.