Warren Dunn Company cans a variety of vegetable-type soups. Recently, the company decided to value its inventories using dollar-value LIFO pools. The clerk who accounts for inventories does not understand how to value the inventory pools using this new method, so, as a private consultant, you have been asked to teach him how this new method works.

He has provided you with the following information about purchases made over a 6-year period.

You have already explained to him how this inventory method is maintained, but he would feel better about it if you were to leave him detailed instructions explaining how these calculations are done and why he needs to put all inventories at a base-year value.

Instructions
(a) Compute the ending inventory for Warren Dunn Company for 2003 through 2008 using dollar-value LIFO.
(b) Using your computation schedules as your illustration, write a step-by-step set of instructions explaining how the calculations are done. Begin your explanation by briefly explaining the theory behind this inventory method, including the purpose of putting all amounts into base-year pricelevels.

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Price (End-of-Year Prices) ndex 130 140 145 Ending Inventory Date Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2005 Ending Inventory Price (End-of-Year Prices) Index 100 105 120 $80,000 115,500 108,000 Date Dec. 31, 2006 Dec. 31, 2007 Dec. 31, 2008 131,300 154,000 174,000