Your compensation as inventory manager includes a bonus plan

Your compensation as inventory manager includes a bonus plan based on gross profit. Your boss asks your opinion on changing the inventory system from FIFO to LIFO. Costs are continuing to rise and the boss realizes that using LIFO will result in a tax savings. NOTE: The method you choose does NOT impact the physical flow of goods in the company.

What do you recommend?

Does this result in an ethical dilemma for you? Why or why not?

Solution

As a inventory manager, here I would have to decide between my compensation and tax saving for my company which certainly is a Ethical Dilemma.

Though the previous method (FIFO) is beneficial for my compensation and new method reduces my compensation, I would still go with my boss\'s opinion on changing the inventory system from FIFO to LIFO because of the tax savings it brings and there by increasing the overall profitability of my company.