Question 34

Gross profit percentage increased by 4.2%

The movement of the cost of goods sold from 76.8% to 72.6% of sales indicates a reduction in costs relative to sales revenue, which directly leads to an increase in the gross profit percentage.

A) Gross profit percentage increased by 4.2%

This option is correct because a decrease in the cost of goods sold percentage results in an increase in gross profit. To calculate the change, the gross profit percentage can be derived from the formula: Gross Profit Percentage = 100% - Cost of Goods Sold Percentage. Initially, it was 100% - 76.8% = 23.2%, and after the change, it became 100% - 72.6% = 27.4%. The increase from 23.2% to 27.4% is indeed 4.2%.

B) Gross profit percentage decreased by 4.2%

This option is incorrect as it contradicts the calculation of the gross profit percentage. A decrease in the cost of goods sold percentage should lead to an increase in gross profit percentage, not a decrease.

C) Net profit percentage increased by 4.2%

This option is also incorrect. While a decrease in cost of goods sold may positively impact gross profit and could potentially affect net profit, the net profit percentage is influenced by other factors such as operating expenses and taxes. Therefore, we cannot conclude that the net profit percentage increased by the same amount without additional information.

D) Net profit percentage decreased by 4.2%

This option is incorrect as well. Similar to option C, a decrease in the cost of goods sold does not inherently indicate a decrease in net profit percentage. The relationship is not direct, and without specific information related to other expenses and revenues, this conclusion cannot be drawn.

Conclusion

The correct answer is A, as the decrease in the cost of goods sold percentage directly results in an increase in the gross profit percentage. Options B, C, and D fail to accurately represent the relationship between cost of goods sold and gross profit, thus confirming that A is the definitive choice.