In 2010 the Moncrief Company purchased from Jim Lester the right to be the soledistributor in the western states of a product called Zelenex. In payment, Moncrief agreedto pay Lester 20% of the gross profit recognized from the sale of Zelenex in 2011.Moncrief uses a periodic inventory system and the LIFO inventory method. Late in 2011,the following information is available concerning the inventory of Zelenex:.:.By the end of the year, the purchase price of Zelenex had risen to $40 per unit. OnDecember 28, 2011, three days before year-end, Moncrief is in a position to purchase20,000 additional units of Zelenex at the $40 per unit price. Due to the increase inpurchase price, Moncrief will increase the selling price in 2012 to $80 per unit. Inventoryon hand before the purchase, 15,000 units, is sufficient to meet the next six months' salesand the company does not anticipate any significant changes in purchase price during2012.Required:1. Determine the effect of the purchase of the additional 20,000 units on the 2011 grossprofit from the sale of Zelenex and the payment due to Jim Lester.