Financial statements

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November 11, 2020 at 8:27 am #594675
ketki15
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The gross profit margin for the year ended 31dec 20×5 was 28%, in comparison with 24% for the preceding year.
What is the reason for increase in the gross profit margin during 20×5?
1- distribution cost reduced in 20×5
2-carbon co sold more goods during 20×5 due to successful marketing campaign
3-there was a change in the sales mix during 20×5, with fewer of its low margin goods being sold.
why is the answer 3? 1 is wrong as it is related to operating profit but shouldnt the ans be 2?
November 11, 2020 at 10:42 am #594705
John Moffat
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Simply selling more will not by itself change the %’age.
If at the moment we sell $100 and make a profit of $10, then the margin is 10%.
If we sell twice as much, so $200, then we will expect to make twice as much profit, so $20.
The % stays at 10%.
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