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. Nicoles 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, NGS purchased 25 units at a total cost of $5.80 per unit. Nicole purchased 30 more units at $7.80 in February. In March, Nicole purchased 15 units at $9.80 per unit. In May, 60 units were purchased at $9.60 per unit. In June, NGS sold 60 units at a selling price of $11.80 per unit and 55 units at $11.20 per unit.

Required:

1.

State whether the transportation cost included in each purchase should be recorded as a cost of the inventory or immediately expensed.

	Cost of the Inventory
	Immediately Expensed

2.	Compute the Cost of Goods Available for Sale, Cost of Goods Sold, and Cost of Ending Inventory using the first-in, first-out (FIFO) method. (Round "Cost per Unit" to 2 decimal places.)

3.	Calculate the inventory turnover ratio, using the inventory purchased on December 31 as the beginning inventory. (Round your answers to 2 decimal places.)

4.	Would a different inventory cost flow assumption allow Nicoles Getaway Spa to better minimize its income tax?

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