2A1G GORDON HAS HAD THE FOLLOWING FINANCIAL RESULTS FOR THE LAST FOUR...

1.

CSO: 2A1a

LOS: 2A1g

Gordon has had the following financial results for the last four years.

Year 1 Year 2 Year 3 Year 4

Sales

$1,250,000 $1,300,000 $1,359,000 $1,400,000

Cost of goods sold

750,000

785,000

825,000

850,000

Gross profit

500,000

515,000

534,000

550,000

Inflation factor

1.00

1.03

1.07

1.10

Gordon has analyzed these results using vertical common-size analysis to determine

trends. The performance of Gordon can best be characterized by which one of the

following statements?

a.

The common-size gross profit percentage has decreased as a result of an

increasing common-size trend in cost of goods sold.

b.

The common-size trend in sales is increasing and is resulting in an increasing

trend in the common-size gross profit margin.

c.

The common-size trend in cost of goods sold is decreasing which is resulting in

an increasing trend in the common-size gross profit margin.

d.

The increased trend in the common-size gross profit percentage is the result of

both the increasing trend in sales and the decreasing trend in cost of goods sold.