Texas Instruments is a major producer of semiconductors and other
Texas Instruments is a major producer of semiconductors and other electrical and electronic products. Semiconductors are especially vulnerable to price fluctuations. The following are from the company’s annual report ($ in millions):

Texas Instruments uses a variety of inventory methods, but for this problem assume it uses only FIFO.

Summary of costs to account for is as follows:
Beginning inventory ........ $ 400
Purchases ............ 1,580
Cost of goods available for sale .... $1,980
Other expenses for this product .... $ 600
Income tax rate, 40%
1. Prepare a comparative income statement for the 2011 fiscal year for the product in question. Use the FIFO, LIFO, and average cost inventory methods. Remember that when a periodic inventory system is used the average cost method is known as weighted-average cost.
2. By how much would income taxes have differed if Texas Instruments had used LIFO instead of FIFO for this product?
3. Suppose Texas Instruments had used the specific identification method. Compute the gross margin (or gross profit) under two different scenarios; if the ending inventory had consisted of
(a) 90 units @ $8 and 20 units @ $7,
(b) 60 units @ $5 and 50 units @$8.
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