Question

If a company achieves an increase in its gross profit percentage from one year to the next, the company:

must have a higher net income.

might be obtaining products at a lower cost per unit.

must have decreased its operating expenses.

must have had a sales volume increas

Answer 1

Solution;

B) Might be obtaining products at a lower cost per unit,

Inorder to increase the gross profit margin,We need to reduce the cost of goods sold.The cost of goods sold can be reduced by identifying lower priced suppliers,less expensive raw materials,outsourcing etc.Here the purchase of product or raw materials will reduce the cost of goods sold,It will results increased grossprofit margin.

Rest of the options are wrong.Because if we are increasing the sales,Cost of goods sold is also increases.It won’t increase the gross profit margin.Increased net income and reduced operating expense helps in the increase of net profit margin not gross profit margin.