Interactive.com just started business and is trying to decide which inventory cost method-FIFO or average cost-to use. Assuming prices are falling, as they oft en do in the information technology sector, answer the following questions for Interactive.com:

(a) Which method will result in having higher ending inventory? Will this method also result in an ending inventory value that is closer to replacement cost? Explain.

(b) Which method will result in the higher cost of goods sold? Will this method also result in the most current cost of goods sold matched against revenue? Explain.

(c) What guidelines are important for Interactive.com to consider as it tries to select the most appropriate inventory cost method?