Courtney, Inc. began operations in 2000 as a publisher of children’s books. From modest beginnings, the company grew steadily with sales reaching \($52.3\) million in 2008. In late 2006, management began revamping the company’s production process to enhance profitability. Streamlining operations permitted the company to effectively operate with lower raw material inventory levels, so these inventories were gradually reduced during 2007 and 2008. Courtney's raw materials consist primarily of ink and paper, with costs of the latter rising steadily since 2000 as a result of curtailed logging operations in the United States and increased transportation costs on imported paper. The following information was excerpted from Courtney's 2008 annual report:

Note |: Inventories During 2007 and 2008, the Company streamlined its operations, permitting the liquidation of certain LIFO inventories that were carried at costs lower than current replacement costs. These liquidations increased earnings before income taxes by \($892,000\) and \($2,355,000\) in 2007 and 2008, respectively.
Required:
1. Calculate Courtney’s gross profit as a percentage of sales as reported for 2006 through 2008.
2. Recompute the company’s gross profit percentage for 2006 through 2008 adjusting for the LIFO dipping effect.
3. Assume that Courtney's annual report contained a comment in the Management's Discussion and Analysis section citing the company’s increased gross profit as evidence that the production process changes were having the desired effect. Would such a statement be justified?

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($ in thousands) 2008 2007 2006 Net sales $52,328 $46,931 $45,286 Cost of goods sold 34,746 31,538 31,157 Gross profit $17,582 $15,393 $14,129