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.