Final answer:
A decrease in Gross Profit Margin (GPM) could lead to an increase in gross profit, depending on the circumstances. Lowering the price of products may attract more customers, resulting in increased sales volume and higher gross profit.
Step-by-step explanation:
A decrease in Gross Profit Margin (GPM) could lead to an increase in gross profit, depending on the circumstances. GPM is a measure of profitability that shows the percentage of revenue left after deducting the cost of goods sold. If a company reduces its GPM by lowering the price of its products while keeping the cost of goods sold constant, it may attract more customers due to the lower prices, resulting in increased sales volume and ultimately higher gross profit.
For example, let's consider a company that sells smartphones. If the company decreases its GPM by lowering the price of its smartphones, it may attract more customers who were previously deterred by the high prices. The increased sales volume resulting from the lower prices can offset the decrease in profit margin, leading to an overall increase in gross profit.
However, it's important to note that an in-depth analysis of the company's cost structure, market dynamics, and customer behavior is necessary to accurately determine the impact of a decrease in GPM on gross profit.