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147 inventory turnover in the spaces provided indicate the likely effect of each of 4298117


147. Inventory turnover
In the spaces provided, indicate the likely effect of each of the following events or strategies upon the inventory turnover rate. Use the following code letters: I for Increase, D for Decrease, and NE for No Effect.
____ (a) Switched from the LIFO flow assumption to FIFO during a period of rising prices.
____ (b) Dramatically increased advertising expense.
____ (c) Increased the sales price of merchandise that is so popular it is difficult to keep in stock.
____ (d) Implemented internal control procedures to reduce a serious inventory shrinkage problem.
____ (e) Switched from a restrictive credit policy to offering liberal terms to credit customers.

148. Inventory flow assumptions
Briefly discuss the factors management should consider in deciding:
(a) Whether to use specific identification or a flow assumption in measuring the cost of goods sold.
(b) Whether to use FIFO or LIFO. (Assume a long-run trend of slowly rising prices.)



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