of $62,000,000. In comparison, the First in First Out (FIFO) methods, the method we will switch to, we receive a Net Income of $12,675,000 and realize a Cost of Goods Sold of $50,500,000. Looking at the raw numbers it seems pointless and illogical not to switch as our bottom line is hurt by the fact that we are maintaining a traditional approach in the times of change.

Certainly this change will not be favorable by everyone at this company due to the fact that there will be underlying considerations existing. While the shift in the Net Income will definitely be beneficial, we cannot solely consider the raw numbers as we will be assuming an Income Taxes Payable liability of around 2 million dollars as soon as we switch. While this may seem like minimal in comparison to the gain in Net Profit we will incur, we must also look at the factor that we have saved over 5 million dollars through the use of LIFO. By changing now, we are able to take advantage of the changing external factors and change based on our decisions as opposed to being forced to having to change due to legislation.

The primary function of our organization is to act upon the best interests of the stakeholders. It is important that the stakeholders in our firm understand what is happening with this switch so we will be disclosing the information for calculating both the LIFO and FIFO in order to have them understand what the switch entails. While some may be upset over the fact that Chief Operations Officer, Rick Martino, was part of the decision to make this transition, the fact is that without said change our company could likely find itself in further woes than just our 2008 slump. Rick Martino’s plan to change the inventory costing is in no way attempting to play with the earnings rather than managing the operations but strategic management on behalf of the company. By changing the way that our inventory costing is processed, we are able to adapt to the changing environment and be able to maintain comparative and competitive results.