Question

When a company that sells its products with a positive gross profit increases its sales by 15% and its cost of goods sold by 7%, the cost of goods sold ratio will:

A. Increase
B. Decrease
C. Remain unchanged
D. Not be able to be determined with the information provided

Answer 1

The cost of goods sold ratio will decrease.

Step-by-step explanation:

The cost of goods sold ratio will decrease when a company that sells its products with a positive gross profit increases its sales by 15% and its cost of goods sold by 7%.

To calculate the cost of goods sold ratio, divide the cost of goods sold by the sales revenue and multiply by 100. Since the increase in sales revenue is greater than the increase in cost of goods sold, the cost of goods sold ratio will decrease.