An increase in the 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.
Gross profit percentage = [(Net sales revenue - Cost of goods sold) ÷ Net sales revenue] × 100

Question

Quizplus · Accepted Answer

An increase in the gross profit percentage means that the ratio of gross profit to sales has increased. This can only occur if either the cost of goods sold decreases or the net sales revenue increases. As the question mentions an increase in gross profit percentage, it means that cost of goods sold as a percentage of sales has decreased, which is option A.

An Increase in the Gross Profit Percentage Indicates That