Assume that a Firestone Tire Store completed the following perpetual inventory transactions for a line of tires.

Beginning Inventory ........ 34 tires @ $ 82

Purchase ......... 25 tires @ $88

Sale .............. 40 tires @$134

Requirements

1. Compute cost of goods sold and gross profit under FIFO.

2. Compute cost of goods sold and gross profit using average cost. Round average cost per unit to the nearest cent and all other amounts to the nearest dollar.

3. Which method results in the larger gross profit and why?