AA Hardware uses the LIFO method to value its inventory. Inventory at the beginning of the year consisted of 25,000 units of the company's one product. These units cost $16 each. During the year, 75,000 units were purchased at a cost of $19 each and 81,500 units were sold. Near the end of the fiscal year, management is considering the purchase of an additional 10,000 units at $19.
What would be the effect of this purchase on income before income taxes? What is the amount and is it higher, lower, or no effect?
What would be the effect of this purchase on income before income taxes using FIFO method? What is the amount and is it higher, lower, or no effect?