Final answer:
The question involves analyzing the impacts of different inventory methods in a periodic inventory system, typically used for ending inventory and COGS calculations at the end of the accounting period. The methods include FIFO, LIFO, Average Cost, and Specific Identification, and are essential for financial reporting.
Step-by-step explanation:
The passed scenario talks about analyzing the effects of four alternative inventory methods in a periodic inventory system. Within a periodic inventory system, companies don't continuously update inventory counts; instead, they calculate the cost of goods sold and ending inventory only at the end of the accounting period using one of the inventory costing methods.
In order to accurately value the inventory and calculate cost of goods sold (COGS), one must consider the potential impact of using different inventory costing methods such as First-In, First-Out (FIFO), Last-In, First-Out (LIFO), Average Cost, or Specific Identification. These methods can significantly affect the financial statements, especially in times of price fluctuations for the inventory items.
Performing the calculations starts with calculating the total cost of buying the basket of goods. It involves multiplying the number of units purchased by the unit cost to determine the total cost at various time periods. This total cost is an essential variable when applying the selected inventory costing method at the end of the period to determine the ending inventory value and the cost of goods sold for the period.