Which of the following scenarios is consistent with an increasing cost of goods sold to sales percentage and increasing inventory turnover?
A) Firm raises prices to increase its gross margin but inventory sells more slowly.
B) Weak economic conditions lead to reduced demand for a firm's products, necessitating price reductions to move goods.
C) Strong economic conditions lead to increased demand for a firm's products, allowing price increases.
D) Firm shifts its product mix toward lower margin, faster moving products.

Question

Quizplus · Accepted Answer

When a firm shifts its product mix toward lower margin, faster moving products, it is likely to have a higher inventory turnover. This shift in product mix could also lead to a higher cost of goods sold to sales percentage due to the lower margins on the products. Therefore, D is the correct answer. The other options suggest scenarios where it is unlikely for both the cost of goods sold to sales percentage and inventory turnover to increase simultaneously.

Which of the Following Scenarios Is Consistent with an Increasing