If Moon Corporation's gross margin declined,which of the following is true?
A) Its cost of goods sold increased.
B) Its cost of goods sold as a percent of sales increased.
C) Its sales increased.
D) Its net profit margin was unaffected by the decline.

Question

Quizplus · Accepted Answer

Gross margin is calculated by subtracting the cost of goods sold from the sales. Therefore, if the gross margin declines, it means either the cost of goods sold increased or the sales decreased. However, since the question does not mention a decrease in sales, we can infer that the cost of goods sold increased. If the cost of goods sold increased, it means that the cost of producing each unit of product increased, which would lead to a higher cost of goods sold as a percentage of sales.

If Moon Corporation's Gross Margin Declined,which of the Following Is