The board of directors of Deion Sanders Corporation is considering whether or not it should instruct the accounting department to shift from a first-in, first-out (FIFO) basis of pricing inventories to a last-in, first-out (LIFO) basis. The following information is available.

Sales ......... 21,000 units @ $50

Inventory, January 1 .... 6,000 units @ 20

Purchases ....... 6,000 units @ 22

10,000 units @ 25

7,000 units @ 30

Inventory, December 31 .. 8,000 units @ ?

Operating expenses . $200,000

Instructions

(a) Prepare a condensed income statement for the year on both bases for comparative purposes.

(b) Advise the Board: Should the company switch to LIFO? Explain.