LIFO liquidations, income tax implications, and year-end purchases

Ruhe Auto Supplies began operations in 1998. The company"s inventory purchases and sales in the first and subsequent years of operations are as follows:

Year	Units Purchased	Cost per Unit	Units Sold
1998	20,000	$ 5	4,000
1999	8,000	10	8,000
2000	7,000	15	9,000
2001	8,500	20	7,000
2002	6,000	25	7,500
2003	7,500	30	7,000
2004	9,000	50	8,000
2005	8,000	65	9,000
2006	9,500	70	9,000
2007	7,000	75	8,000
2008	8,500	80	8,500
2009	9,000	85	7,500
2010	8,500	90	9,500
2011	9,500	95	20,000

The company"s federal income tax rate is 30 percent. For the year ended December 31, 2011, Ruhe Auto Supplies generated $3,000,000 in revenues and incurred $800,000 in expenses (exclusive of cost of goods sold). Ruhe Auto Supplies uses the LIFO cost flow assumption to account for inventory.

REQUIRED:

a. Compute ending inventory as of December 31, 2011. Identify the number of units in ending inventory and the costs attached to each unit.

b. Compute the company"s 2011 income tax liability and net income after taxes for the year ended December 31, 2011.

c. Assume that Ruhe Auto Supplies was able to purchase an additional 10,500 units of inventory on December 31, 2011, for $95 per unit. Would you advise the company to purchase these additional units? Explain your answer.