Target Inventory Case Study
The majority of Target inventory is accounted for under the retail inventory accounting method (RIM) using the last-in, first-out (LIFO) method. Inventory is stated at the lower of LIFO cost or market. Target use the retail inventory method to account for inventory and cost of sales. Under LIFO Target uses this method for inventory because using the last-in, first-out (LIFO) method this determines the cost-to-retail ratio to each merchandise ending retail value. The cost of our inventory includes:
1. the amount we pay to our suppliers to acquire inventory
2. Freight costs with the delivery of product to Target’s distribution centers and stores
3. Import costs, reduced by vendor income and cash discounts
Although Target’s inventory value is
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