Answer
Estefan Co. will receive tax benefits from a switch to the LIFO method provided the inventory quantities do no increase and there is an increase in price level. This is because the inventory recently acquired at a higher purchase price will be matched against revenues.
Work Step by Step
It is also important to note that where unit costs go down as production increases, the tax benefit losses applicability. This is also the case, where inventory turnover turns out to be high.
