Inventory Control Methods

Jeffrey Gennette is the CEO of Macys (a United States retailer). Because Jeffreys bonus is based on the company's earnings, he has directed the controller to use FIFO as the inventory costing method. Jason did not tell the controller his real reason for the directive; instead, he stated that he thought FIFO better reflected the actual flow of inventory costs.

Review the following links and company websites then answer the questions.

• The University Record Online: University of Michigan
• Kohl's
• Macys

1. Jeffreys decision to select FIFO appropriate? Is it ethical? Is Jeffrey wrong if this will help the company and also benefit him too?
2. What are some of the pitfalls of a company basing a managers or CEOs compensation on the companys earnings?
3. Using the links provided for Kohls and Macy's (a United States retailer); determine the inventory turnover ratio for the companies. What does this ratio tell you about these companies? How do the companies compare? You can reference page 621 in your textbook.
4. Using the links provided for Kohls and Macys, calculate the number of days in inventory for the companies. What does this ratio tell you about these companies? How do the companies compare? You can reference page 621 in your textbook.