First in First out Assumes the first units purchased are the first to be sold. Best for an income statement and balance sheet. Assumes the last unit purchased are the first to be Last in, Last out sold. Best for tax advantage. 1 Computes a new weighted average cost per unit after each purchase. Best to smooth out the highs and the lows in price changing inventory cost. or of requires that inventory be reported at the lower of inventory's original cost or market value (replacement cost). shows how many times a company tums over its Inventory during a period. Is it good to have a high number or low number? ratio tells how much inventory is available in terms of the number of days sales