AAA Hardware uses the LIFO method to value its inventory. Inventory at the beginning of the year consisted of 29,000 units of the companys one product. These units cost $15 each. During the year, 79,000 units were purchased at a cost of $18 each and 83,500 units were sold. Near the end of the fiscal year, management is considering the purchase of an additional 12,000 units at $18.

Required:

1. What would be the effect of this purchase on income before income taxes?

2. What would be the effect of this purchase on income before income taxes using FIFO method?