HSC Stuff > HSC Business Studies
HSC Business Studies Question Thread
Dezzel:
Hey!
Would I lose marks in the hsc report if the question asked for 2 strategies and I misread and wrote 4?
LoneWolf:
(@Dezzel No, however you would be wasting your time.)
Hey, Im stuck on this question. can anyone tell me why it is FIFO not JIT?
Grace0702:
Hey LoneWolf!
I recall doing this question myself and asking the exact same question. They key is to carefully read the question. It is asking us to find the most appropriate valuation method for inventory rather than just an inventory management style. The only two valuation methods we are taught are FIFO and LIFO. JIT is just a style of management rather than a valuation method. So based on this we know the only two possible solutions are FIFO and LIFO.
Now the business is seeking to show maximum profits for the current financial period, and since cost of stock is increasing choosing a FIFO method is necessary. In doing so businesses will use the initial purchase price of stock (which will be lower than the current costs) to calculate profits and other values, this allows them to overestimate profits such that they look more favourable to competitors and potential investors.
(If a business were to choose a LIFO method they would overstate costs and understate profits so they will have to avoid paying large amounts on tax on these profits)
I hope that made sense. Inventory management is one of the most confusing topics in the syllabus, so let me know if you have any other questions! :)
LoneWolf:
Thanks.
Arrrrrrr its those small things which catch me... grrrr
Travis Scott:
I am doing this assessment and I am doing IKEA, I want to mention what kind of inventory strategy they use, is it JIT, FIFO, LIFO INCLUDING REFERNCES. I can't find any info that gives that out please help and quick.
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