In 2009, an agricultural company introduced a new cropping process which reduced the cost of growing some of its crops. If sales in 2008 and 2009 were steady at $25 million, but the gross margin increased from 2.3% to 3.4% between those years, by what amount was the cost of sales reduced?
A)$575 000
B)$325 000
C)$275 000
D)$425 000

Question

Quizplus · Accepted Answer

First, we need to calculate the gross margin in dollars for each year:

- 2008: 2.3% of $25 million = $575,000
- 2009: 3.4% of $25 million = $850,000

The difference between these two amounts is the amount by which the gross margin increased:

$850,000 - $575,000 = $275,000

This means that the cost of sales must have been reduced by $275,000 in order to achieve the increase in gross margin. Therefore, the correct answer is option D.

In 2009, an Agricultural Company Introduced a New Cropping Process