During 2013, WW Inc. reduced its LIFO eligible inventory quantities due to a problem with its major supplier. The effect of this liquidation was to increase its cost of goods sold by approximately $50 million. WW has a 40% income tax rate. If WW had not experienced these supplier problems and the resulting liquidation:

Question

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The liquidation of LIFO inventory increased COGS by $50 million, suggesting that older, cheaper inventory was used. If prices were declining, using older inventory would have increased COGS, reducing net income. Without liquidation, net income would have been $30 million higher ($50 million * (1 - 0.40)).