Betty Company began operations in 2016 and uses the average cost method in costing its inventory. In 2017, Betty is investigating a change to the LIFO method. Before making that determination, Betty desires to determine what effect such a change will have on net income. Betty has compiled the following information:

2016 2017

Ending Inventory using:

Average cost $180,000 $200,000

LIFO $180,000 $110,000

Net income (computed using the

averagecost method) 120,000 170,000

Assume a 40% tax rate.

If Betty adopted LIFO in 2017, net income would be

a. $80,000.

b. $116,000.

c. $170,000.

d. $224,000