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

Will this cost formula also result in an ending inventory value that is closer to replacement cost? Explain.

Will this cost formula also result in the most current cost of goods sold matched against revenue? Explain.

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