Answer:
Income after tax = $1666
Explanation:
LIFO (Last-In-First-Out) is a method of inventory valuation where the goods that are received last are used first. In other words, the latest stock is used first. This is common for bulky inventory, stacked one on top of another.
In order to obtain the after-tax income, both the gross profit and income before tax are required. To obtain gross profit, we require the cost of goods sold information. The inventory information is as follows:
Feb 1 : Purchases : 102 units x $42 = $4284
Mar 14 : Purchases : 175 units x $44 = $7700
May 1 : Purchases : 124 units x $46 = $5704
288 units were sold
The COGS would be:
124 x $46 = $5704
164 x $44 = $7216
Thus COGS : $5704 + $7216 = $12920
Gross profit : Sales - COGS
Sales : $59 x 288 = $16992
Gross Profit = $16992 - $12920 = $4072
Income before tax : Gross Profit - Expenses
Operating expenses : $1692
Income before tax = $4072 - $1692 = $2380
Income after tax : Income before tax - (tax rate x income before tax)
Tax rate : 30%
Income after tax = $2380 - ($2380 x 30%) = $1666
