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Required information

In October, Nicole eliminated all existing inventory of cosmetic items. The trouble of ordering and tracking each product line had exceeded the profits earned. In December, a supplier asked her to sell a prepackaged spa kit. Feeling she could manage a single product line, Nicole agreed. Nicole's Getaway Spa $($NGS$)$ would make monthly purchases from the supplier at a cost that included production costs and a transportation charge. NGS would keep track of its new inventory using a perpetual inventory system.

On December $31$ of last year, NGS had $20$ units at a total cost of $$5\mathrm{.}40$ per unit. Nicole purchased $30$ more units at $$7\mathrm{.}40$ in February. In March, Nicole purchased $20$ units at $$9\mathrm{.}40$ per unit. In May, $60$ units were purchased at $$9\mathrm{.}20$ per unit. In June, NGS sold $60$ units at a selling price of $$11\mathrm{.}40$ per unit and $50$ units at $$11\mathrm{.}60$ per unit.

$4.$ Would a different inventory cost flow assumption allow Nicole's Getaway Spa to better minimize its income tax?

Multiple Choice

Yes, the LIFO method would allow Nicole's Getaway Spa to better minimize income tax. Product costs have been mostly increasing, so LIFO will produce the highest Cost of Goods Sold, which results in the lowest Income before Income Tax Expense.

No$,$ the FIFO method already allows Nicole's Getaway Spa to minimize income tax. Product costs have been mostly increasing, so FIFO produces the highest Cost of Goods Sold, which results in the lowest Incom before Income Tax Expense.