LIFO liquidation adjustment

Can anyone make sure that this is correct?

If the question says that a company had a LIFO liquidation in 2014 and this resulted a decrease of COG by $263, when we calculate the ‘adjusted’ profit margin, are we supposed to deduct $263 from profit, to normalise the effect from liquidation?

2014 Net sales=11159, COG=9898, liquidation resulted a decrease of COG by $263.

Calculate profit margin = (11159-9898-263)/11159= 8.9%

You need to add it back to COGS. The 9898 COGS value already includes the 263, so to adjust it you need to add it back. COGS should be 10 161. Or, as you did above, deduct it from gross margin as the liquidation inflated it.