Assume that net sales are increasing faster than the rate of inflation,and that the company's gross profit rate is rising.Of the following,the most logical conclusion is that:
A)The company's cost of purchasing merchandise is rising rapidly.
B)Operating expenses are falling.
C)Demand for the company's products is very strong.
D)The company has achieved an increase in sales volume by reducing its sales prices.

Question

Quizplus · Accepted Answer

If net sales are increasing faster than the rate of inflation and the gross profit rate is rising, it could be due to a strong demand for the company's products. This indicates that consumers are willing to pay more for the products, resulting in higher sales and gross profits for the company. Option A is unlikely because if the cost of purchasing merchandise was rising rapidly, it would reduce the company's gross profit rate. Option B is unlikely as well because if operating expenses were falling, it would lead to an even higher gross profit rate, rather than a lower one. Option D is unlikely because reducing sales prices would lead to a lower gross profit rate unless the increase in sales volume is large enough to offset the lower prices.

Assume That Net Sales Are Increasing Faster Than the Rate