Requirements: Determine the Cost of Goods Sold as well as the cost of Ending Inventory for each year using each of the following methods: (a) Average Cost; (b) First In, First Out; and (c) Last In, First Out. Assuming that the company originally used FIFO costing, determine if tax savings will be realized if a switch is made from FIFO to LIFO. How much tax savings will be realized for each of the three years, if any? Assume 30% tax rate.

ZIP Corporation had traditionally used the FIFO method of inventory valuation. You are given the following information on transactions affecting ZIP's inventory account:

1995

Beginning Balance 7,500 cases @ P 24.50

Purchases 500 cases @ 25.00

1,500 cases @ 28.25

1,500 cases @ 24.75

3,500 cases @ 29.00

12,500 cases @ 35.75

Sales

1996

Beginning Balance 2000 cases

Purchases 3,500 cases @ 28.75

5,500 cases @ 27.75

4,000 cases @ 30.75

5,000 cases @ 26.00

2,500 cases @ 27.50

Sales 15,500 cases @ 38.50

1997

Beginning Balance 7,000 cases

Purchases 10,000 cases @ 35.75

500 cases @ 37.75

7,500 cases @ 34.50

8,500 cases @ 31.25

9,500 cases @ 32.50

300 cases @ 35.05

5,500 cases @ 37.75

Sales 20,000 cases @ 40.00