E6-41. (Learning Objectives 1, 3: Making inventory policy decisions) For each of the following situations, identify the inventory method that you would use, or, given the use of a particular method, state the strategy that you would follow to accomplish your goal:

a. Company management, like that of IBM and Esplanade Imports, prefers a middle-of-theroad inventory policy that avoids extremes.

b. Inventory costs are decreasing, and your company’s board of directors wants to minimize income taxes.

c. Inventory costs are increasing, and the company prefers to report high income.

d. Inventory costs have been stable for several years, and you expect costs to remain stable for the indefinite future. (Give the reason for your choice of method.)

e. Inventory costs are increasing. Your company uses LIFO and is having an unexpectedly good year. It is near year-end, and you need to keep net income from increasing too much in order to save on income tax.

f. Suppliers of your inventory are threatening a labor strike, and it may be difficult for your company to obtain inventory. This situation could increase your income taxes.