Dickhaut Corporation imports and sells a product that is produced in the Dominican Republic. In the summer of Year $8,$ a hurricane disrupted production and affected Dickhaut$$s supply of this product. Dickhaut uses LIFO to determine the cost of its inventory and cost of goods sold. On January $1,$ Year $8,$ Dickhaut$$s inventory of this product consisted of the following:

Year Purchased Quantity $($units$)$ Cost Per Unit Total Cost

Year $61,600$ $$20\mathrm{.}00$ $$32,000$

Year $72,400$ $$30\mathrm{.}0072,000$

Total $4,000$ $$104,000$

Through mid$-$December, purchases were limited to $5,600$ units, because the cost had increased to $$70$ per unit. Dickhaut sold $9,200$ units during Year $8$ at a price of $$65$ per unit, which significantly depleted its inventory. However, the cost was expected to drop to $$55$ per unit by early January Year $9.$

Required

a$.$ Assume that Dickhaut makes no further purchases during Year $8.$ Compute its gross profit for Year $8.$

Note: Do not use a negative sign with your cost of goods sold amount.

Sales revenue Answer $1$

$598,000$

Cost of goods sold Answer $2$

$468,000$

Gross profit Answer $3$

$130,000$

b$.$ Assume that Dickhaut purchases $3,600$ units for $$70$ per unit before the end of December Year $8,$ so that it maintains its balance of inventory at $4,000$ units. Compute its gross profit for Year $8.$

Note: Do not use a negative sign with your cost of goods sold amount.

Sales revenue Answer $4$

$598,000$

Cost of goods sold Answer $5$

$468,000$

Gross profit Answer $6$

$130,000$

c$.$ How should Dickhaut disclose the LIFO liquidation if it chooses not to make a year$-$end purchase?

Disclosure note:

Gross profit was Answer $7$

increased

by $Answer $8$

$20,000$

due to LIFO liquidation.

d$.$ If Dickhaut$$s corporate tax rate is $25\%,$ should it make a year$-$end purchase? If so$,$ how many units should the company purchase before December $31,$ Year $8?$ Assume that the management of Dickhaut believes it is efficient $($in the long run$)$ to carry $4,000$ units in inventory. For this analysis, calculate total cash flows assuming $($a$)$ no purchases, $($b$)3,600$ units of purchases, and $($c$)1,200$ units of purchase.

Note: Use a negative sign to indicate a cash outflow in the schedule that follows.