El Puerto Company uses LIFO for its inventories. Information regarding 2000’s beginning inventory and purchases up until December 15,2000 is shown below:

Beginning inventory (January 1, 2000) 500,000 units @ $10 $5 million Purchases during 2000: 1,200,000 units @ an average cost of $20 $24 million El Puerto sold 1,500,000 units up to December 15 and expects that very few, if any,additional sales will occur before year-end.Inventory purchase costs are $25 per unit at December 15, and prices are not expected to change over the remainder of 2000.The company’s income tax rate is 40%.

Required

a. Determine El Puerto Company’s ending inventory value and cost of goods sold for 2000, assuming that (1) no additional purchases are made during 2000 and (2) an additional 400,000 units are purchased at $25 per unit before year-end.

b. Based on these calculations, would you advise the company to purchase additional inventory before year-end? Explain.