Gilbert's Hydraulics Has Provided You with the Following Selected Information

question 15

Multiple Choice

Gilbert's Hydraulics has provided you with the following selected information from 2020 and 2021: $$\begin{array} { l r r } &2021 & 2020\\\hline\text { Sales } & { \$ } & { \$740,000 } \\& 785,000 & \\\text { Sales returns and allowances } & 55,200 & 52,000 \\\text { Cost of goods sold } & 358,000 & 305,000 \\\text { Operating expenses } & 285,000 & 255,000 \\\text { Profit } & 86,800 & 128,000\end{array}$$ Which of the following best interprets Gilbert's profit margin?

• A) Profit margin has weakened compared to prior year, decreasing from 45.6% to 41.2%.
• B) Profit margin has weakened compared to prior year, decreasing from 18.6% to 11.9%.
• C) Profit margin has weakened compared to prior year, decreasing from 17.3% to 11.1%.
• D) Profit margin has weakened compared to prior year, decreasing from 55.7% to 50.9%.

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Definitions:

Shut Down

A short-term decision by a firm to cease operations temporarily due to unfavorable market conditions.

ATC Curve

Average Total Cost Curve; a graph that shows the per-unit cost of production at every level of output.

AVC Curve

Average Variable Cost Curve, it represents the change in variable cost associated with producing more units of a good or service.

Variable Input

An input in the production process that can be altered in the short term to adjust the level of output.