2) FIFO COGS = LIFO COGS - (end LIFO reserve - beginning LIFO reserve) so:
FIFO COGS = $29,549 - ($2,403-$2,345) = $29,491
3) COGS = beginning inventory + purchases - ending inventory
An increase in inventory is already included in the calculation of COGS, so you don't need to include it twice (would be my guess, as I'm not exactly an accounting professional)
4) additional income tax expense = LIFO Reserve X income tax rate [You put minus, but probably just a typo]
With rising prices, LIFO COGS > FIFO COGS
If COGS is higher, that means that your reported revenue is LOWER, so you are taxed LESS (even though you made the same amount of money)
Rev - COGS - other stuff = gross profit
higher gross profit = higher taxes |