Inventory valuation methods used can affect the outcome of a companys financial analysis. Top Watches Ltd is an Omega brand watch supplier business based in Windhoek. The company has been in operation for a year now. Over the 12 months period, the companys inventory costs were as follows:

Month	Number of watches	Price Paid
January	100	800
February	100	800
March	100	825
April	100	825
May	100	825
June	100	850
July	100	850
August	150	875
September	150	875
October	150	900
November	150	900
December	150	900
Total watches bought	1,450

Additional Information:

During the year, the unit cost price of Omega watches steadily increased.

Despite the stead increase in the cost of the Omega watch, Top Watch Ltd kept its sales prices the same at N$2,000 per unit in order to stay competitive. This means there was less profit for Top Watch Ltd by the end of the year.

The total number of watches sold during the year was 1,100.

Monthly administrative expenses (water, electricity and rent, salaries) remained unchanged throughout the year at $35,000.

Corporate tax rate is 32%.

Required:

Explain FIFO and LIFO as used in cost accounting.

Using the information at the table above and based on gross profit, net profit margins, and tax liability calculations, evaluate how LIFO and FIFO affect the outcome of a companys financial performance analysis.

Discuss the advantages and disadvantages of FIFO and LIFO.