4. The cost of sales is based on the LIFO inventory method, and gross profit percentages in the second quarter are higher than normal due to an unexpected inventory liquidation traceable to a strike...

4. The cost of sales is based on the LIFO inventory method, and gross profit percentages in the second quarter are higher than normal due to an unexpected inventory liquidation traceable to a strike at a major supplier’s manufacturing facility. Although 11,000 of the supplier’s units were sold during the quarter, the company was only able to purchase 8,000 units. The units liquidated had a cost of $7.00 per unit. The strike ended shortly after the end of the second quarter, liquidated units were replaced at a unit cost of $9.00, and there is no expectation of a LIFO liquidation issue at year-end.