An increase in a gross profit percentage indicates that:
A) cost of goods sold as a percentage of sales has decreased.
B) cost of goods sold as a percentage of sales has increased.
C) operating expenses as a percentage of sales have increased.
D) operating expenses as a percentage of sales have decreased.

Question

Quizplus · Accepted Answer

An increase in gross profit percentage means that the difference between revenue and cost of goods sold has increased. This can be due to either an increase in revenue or a decrease in cost of goods sold. Since the question assumes there has been no change in revenue, the increase in gross profit percentage must mean that cost of goods sold as a percentage of sales has decreased.

An Increase in a Gross Profit Percentage Indicates That