Inventory Valuation - Sometimes you can be holding inventory

Inventory Valuation

Sometimes you can be holding inventory, and it is not yours. Other times you can have inventory with a customer that is still yours. For example, consigned inventory is inventory being held by retailers but owned by the manufacturer. 

Knowing when ownership inventory passes from you to your customers or from your suppliers to you is important when properly stating your inventory balance on the balance sheet and your cost of goods sold on the income statement. 

Respond to the following in a minimum words: 

• What are two reasons some industries have inventory on consignment?
• Why would a company care about which inventory valuation method it uses—LIFO, FIFO, or average? Provide an example to support your answer.