Pool Corporation, Inc., reported in its recent annual report that "In 2010, our industry experienced some price deflation. . . . In 2011, our industry experienced more normalized price inflation of approximately 3.4% overall despite price deflation for certain chemical products.'' This suggests that in some years Pools overall inventory costs rise, and in some years they fall. Furthermore, in many years, the costs of some inventory items rise while others fall. Assume that Pool has only two product items in its inventory this year.

Purchase and sales data are presented below.

	Inventory Item A						Inventory Item B
Transaction	Units			Unit Cost			Units			Unit Cost
Beginning inventory		180		$	7.40			180		$	7.40
Purchases, February 7		220			9.40			220			6.40
Purchases, March 16		240			10.40			240			4.40
Sales, April 28		420						420

Required:

1. Compute cost of goods sold for each of the two items separately using the FIFO and LIFO inventory costing methods.

2. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)?