Question

1. The trend for cost of goods sold is increasing as a percentage of sales and...

1. The trend for cost of goods sold is increasing as a percentage of sales and the trend for total marketing costs as a percentage of sales is decreasing. What does this suggest to the company CEO?

2. What does the following scenario suggest to a company CEO? Sales in units is increasing and average price is decreasing. Net operating income is decreasing.

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Answer #1

1) This tells the production cost is increasing and it is due to increase in material cost or labor cost. The marketing cost decreasing tells that the company is knowing more to the public and same is reflecting in decrease in marketing costs

2)Here the sales volume is increasing but the unit selling price is decreases due to may be increase in competition, net operating income is also decreasing means the contribution margin is decreasing because of reduction in selling price

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