dig in to the three methods we can use to value inventory: FIFO, LIFO and average cost. There are pros and cons to each method. What is key is that we are using a consistent method in valuing inventory and cost of goods sold. You will see that each method can yield different results depending on whether we are in a time or rising or falling prices.

Be careful that you address each part of this prompt as there are multiple components. You could consider organizing your evaluation of the highest inventory cost, lowest inventory cost, highest gross profit, lowest gross profit and lowest annual income tax expense in a chart such as:

During times of rising costs: FIFO LIFO Average Inventory

Highest inventory cost

Lowest inventory cost

Highest gross profit

Lowest gross profit

Lowest annual income tax expense

$*$ Remember that we are talking about times of rising costs of inventory $($not necessarily correlated to our selling price$)$

You might also consider providing an example with numbers to better explain your findings.

In this discussion, be sure to really take into consideration that Everest is an online retailer of consumer goods. Your recommendation may change if Everest was a restaurant food supplier, a gas $($fuel$)$ producer, or manufacturer.