LIFO and Ethical Issues Yokohama Company is a wholesaler of musical instruments in San Francisco. Yokohama has used the LIFO inventory method since 1971. Near the end of 2004, the company's inventory of a particular instrument listed three LIFO layers, two of which were from earlier years and one from 2004 purchases: No. of Units Unit Cost Layer one 4,000 $40 Layer two 2,500 50 2004 Purchases 30,000 60 Total available 36,500 In 2004, Yokohama sold 32,500 units, leaving 4,000 units in inventory. On December 27, 2004, Yokohama had a chance to buy a minimum of 15,000 units of the instru- ment at a unit cost of $70. The offer was good for 10 days, and delivery would be immediate on plac- ing the order. Helen Yamaguchi, chief purchasing manager of Yokohama, was trying to decide whether to make the purchase and, if it is made, whether to make it in 2004 or 2005. The controller had told her that she should buy immediately because the company would save almost $80,000 in taxes. The combined fed- eral and state income tax rate is 45%. 1. Explain why nearly $80,000 of taxes would be saved. 2. Are there any ethical considerations that would influence this decision? Explain.