INVENTORY COSTING WHEN BALANCE SHEET QUANTITIES ARE SMALL. A number of companies have adopted a just-in-time procedure for acquiring inventory.

These companies have arrangements with their suppliers that require the supplier to deliver inventory just as the company needs the goods. As a result, just-in-time companies keep very little inventory on hand.

REQUIRED:

1. Should the inventory costing method (LIFO or FIFO) have a material effect on cost of goods sold when a company adopts the just-in-time procedure and reduces its inventory significantly?

2. Once a company has switched to the just-in-time procedure and has little inventory, should the inventory costing method (LIFO or FIFO) affect cost of goods sold? D-2