LAST IN FIRST OUT

COMPANY PRESENTATION
TABLE OF CONTENTS

01 Last in First Out

02 Advantages and Disadvantages

03 Computation

Application to Airlines
04
LAST IN FIRST OUT

The goods last purchased are first sold

The inventory is thus expressed in terms of earlier or old
price and the cost of goods sold is representative of recent
or new prices
The use of LIFO permits income manipulation, such as by
making year-end purchases designed to preserve existing
inventory layers
In a period of rising prices, the LIFO method would result to
the lowest income.
In a period of declining prices, the LIFO method would result
to the highest net income
ADVANTAGES
LIFO matches most recent costs against
current revenues
Tax benefits and improvement in cash flows
LIFO minimizes write-downs to market
Physical flow of inventory
DISADVANTAGES
Reduced earnings in inflationary times
Understatement of inventory
Problem of LIFO liquidation
Manipulation of income
LIFO COMPUTATION
SELL 250 PANCIT CANTON

COGS 225 X $16 =3,600

25 X $ 12 = 300
3,600 + 300 = $3,900

Ending Inventory 200 X $10 = 2,000

125 X $12 = 1,500
2,000 + 1,500 = $3,500
 APPLICATION TO AIRLINES
SEATS
Airlines often sell economy/coach seats first since they require less time
for servicing and maintenance, whereas compared to first-class and
business-class seats where in-flight services need to be planned and taken
into account for longer times, especially for VIPs and big-name
personalities.
Airlines sell the seat classes part by part in every class. (This is followed
when passengers dont avail the choice of seat additional service.) This is
known as the "Random Seat Arrangement" of the airline.

LABOR FORCE
When the need to cut costs arrive, most companies would often reduce
salary income for those with shorter service or employment to the
company. During the pandemic, this was true of CebuPacific Airlines, where
they retrenched the newly hired flight attendants and pilots and kept their
more experienced veterans.