Table 3.2
Dana Dairy Products Key Ratios Income Statement
Dana Dairy Products
For the Year Ended December 31, 2013 Balance Sheet
Dana Dairy Products
December 31, 2013
-Dana Dairy Products' gross profit margin was inferior to the industry standard. This may have resulted from ________. (See Table 3.2)
A) a high sales price
B) the high cost of goods sold
C) excessive selling and administrative expenses
D) excessive interest expense

Question

Table 3.2
Dana Dairy Products Key Ratios  Income Statement
Dana Dairy Products
For the Year Ended December 31, 2013  Balance Sheet
Dana Dairy Products
December 31, 2013 
-Dana Dairy Products' gross profit margin was inferior to the industry standard. This may have resulted from ________. (See Table 3.2)
A) a high sales price 
B) the high cost of goods sold 
C) excessive selling and administrative expenses 
D) excessive interest expense

Quizplus · Accepted Answer

Gross profit margin is calculated as gross profit divided by net sales. Therefore, a lower gross profit margin could be caused by a high cost of goods sold relative to sales, which is likely the case for Dana Dairy Products as their gross profit margin is inferior to the industry standard. Additionally, choices C and D relate to operating expenses and financial expenses, respectively, and would not directly affect the gross profit margin. Choice A may be a factor, but it is not a clear explanation for the inferior gross profit margin.

Table 3.2 Dana Dairy Products Key Ratios Income Statement