Final answer:
When a company's gross margin percentage increases, it means that the company is generating more profit from each dollar of sales. Possible explanations for this increase include an increase in selling price, a reduction in cost of goods sold, and an increase in sales of high-margin products. A reduction in sales volume is not a possible explanation.
Step-by-step explanation:
When a company's gross margin percentage increases, it means that the company is generating more profit from each dollar of sales. There are several possible explanations for this increase, such as:
However, a reduction in sales volume is not a possible explanation for the increase in gross margin percentage, assuming all other things are equal. When sales volume decreases, the gross margin percentage usually decreases or remains unchanged, unless there is a significant increase in selling price or reduction in cost of goods sold to compensate for the decrease in sales volume.