Which of the following statements is correct?

A) When cost of goods sold as a percentage of sales increases,the gross profit percentage will increase.
B) It is possible that when cost of goods sold in dollars increases,cost of goods sold as a percentage of sales decreases.
C) If gross profit percentage is the same for the current and past year,then sales and cost of goods sold in dollars did not change.
D) If gross profit percentage increases from one year to the next,then the net income percentage will also increase from one year to the next.

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Sascha Stutz · Accepted Answer

Final Answer : B, Explanation :  It is possible for the cost of goods sold in dollars to increase while the cost of goods sold as a percentage of sales decreases if the increase in the cost of goods sold is proportionally smaller than the increase in sales. For example, if sales increase by 10% and cost of goods sold increases by 5%, then the cost of goods sold as a percentage of sales will decrease. Thus, statement B is the correct statement. Statements A, C, and D are all incorrect.

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