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Carbon Co’s gross profit margin for the year ended 31 December 20X5 was 28%, in comparison with 24% for the preceding year.
Which one of the following statements could be a plausible reason for the increase in the gross profit margin during 20X5?
A) Distribution costs reduced during 20X5
B) Carbon Co sold more goods during 20X5 due to a successful marketing campaign early in the year
C) There was a change in the sales mix during 20X5, with proportionately fewer of its low-margin goods being sold
Correct answer is C.Could you please explain choice C? Why this choice is correct i didn’t understandSuppose the sell two different products – one giving a higher gross margin than the other. The overall gross margin will be somewhere between the two.
Changing the sales mix means selling more of one product and less of the other product. If they sell more of the product giving the higher margin (and therefore less of the product giving the lower margin) then the overall margin will be higher.
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