Haverty Industries increased its gross profit rate from 18.4% in 2013 to 23.7% in 2014. Which of the following would be a possible explanation for this change?
A) Haverty's global sourcing efforts at the beginning of 2014 resulted in a lower cost of merchandise sold.
B) Haverty's new profit lines with lower margins in 2014 became a larger component of their sales.
C) Haverty increased its product markdowns in 2014.
D) Haverty's average margin between the selling price and the inventory cost decreased over this two-year period.

Question

Quizplus · Accepted Answer

A lower cost of merchandise sold would increase the gross profit rate, as gross profit is calculated as sales minus the cost of goods sold.

Haverty Industries Increased Its Gross Profit Rate from 18