During 2011 (its first year of operations) and 2012, Batali Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2013, Batali decided to change to the average method for both financial reporting and tax purposes.

Income components before income tax for 2013, 2012, and 2011 were as follows ($ in millions):

2013 2012 2011

Revenues $420 $390 $380

cost of goods (FIFO) (46) (40) (38)

cost of goods sold (average) (62) (56) (52)

operationg expenses (254) (250) (242)

Dividends of $20 million were paid each year. Batali