Cost for inventory purposes should be determined by the inventory cost flow method most clearly reflecting periodic income.

Required:
1. Describe the fundamental cost flow assumptions for the average cost, FIFO, and LIFO inventory cost flow methods.
2. Discuss the reasons for using LIFO in an inflationary economy.
3. Where there is evidence that the utility of inventory will be less than cost, what is the proper accounting treatment, and under what concept is that treatment justified?