During 2019,Home Style's cost of goods sold percentage was 68.2%,and selling and store operating costs were 19.3% of sales.During 2018,Home Style's cost of goods sold percentage was 70.1% while selling and store operating costs were 19.0% of sales.What effect would the change in these percentages have on 2019's gross profit percentage and net profit margin percentage?

A) The decrease in the cost of goods sold percentage would increase both the gross profit and net profit margin percentages,but the increase in the selling and store operating costs percentage would decrease both the gross profit and net profit margin percentages.
B) The decrease in the cost of goods sold percentage would decrease both the gross profit and net profit margin percentages,but the increase in the selling and store operating costs percentage would increase both the gross profit and net profit margin percentages.
C) The decrease in the cost of goods sold percentage would increase both the gross profit and net profit margin percentages,but the increase in the selling and store operating costs percentage would decrease only the net profit margin percentage.
D) The decrease in the cost of goods sold percentage would decrease both the gross profit and net profit margin percentages,but the increase in the selling and store operating costs percentage would increase only the net profit margin percentage.

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NNEDIMMA OKEY IWOBI · Accepted Answer

Final Answer : C, Explanation :  A decrease in the cost of goods sold percentage would increase the gross profit percentage, since the cost of goods sold is the denominator in the gross profit margin formula. However, an increase in selling and store operating costs would decrease the net profit margin percentage, since these costs are subtracted from the gross profit to arrive at net profit. Therefore, only option C is correct.

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