Question

Mattel’s gross profit margin increased year-over-year. The gross profit margin ratio may have been impacted by ALL of the following EXCEPT:

	a.	lower sales to Toys”R” Us sales due to its bankruptcy
	b.	higher costs of raw materials
	c.	increased advertising and promotion expenses
	d.	higher transportation costs associated with inventory
	e.	lower obsolesence costs

Answer 1

Correct option (c) increased advertising and promotion expenses.

The gross profit is arrived at by deducting the cost of goods sold from the sales made. The cost of goods sold includes opening inventory,purchases, direct expenses and ending inventory.

The advertising and promotion expenses are indirect expenses and they have nothing to do with the gross profit of the company. Because the indirect expenses effect the net profit of the company not the gross profit.

Thus the increased advertising and promotion expenses will not impact the gross profit margin ratio of the company....

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