El Faro Company merchandises a single product called Smart. The following date represent beginning inventory and purchases of Smart during the past year: January 1 inventory, 34,000 units at $11.00, February purchases, 40,000 units at $12.000; March purchases, 80,000 units at $12.40; May purchases, 60,000 units at $12.60; July purchases, 100,000 units at $12.80; September purchases, 80,000 units at 12.60; and November purchases, 30,000 units at $13.00. Sales of Smart totaled 393,000 units at $20.00 per unit. Selling and administrative expenses totaled $2,551,000 for the year. El Faro Company uses the periodic inventory system.

Required

1. Prepare a schedule to compute the cost of goods available for sale.

2. Compute income before income taxes under each of the following inventory cost flow assumptions:

(a) The average-cost method;

(b) The FIFO method; and

(c) The LIFO method.

3. Compute inventory turnover and days inventory on hand under each of the inventory cost flow assumptions listed in requirement 2. What conclusion can you draw?