In 20X2, C Co's Gross Profit Ratio Was 70

question 151

Multiple Choice

In 20X2, C Co's gross profit ratio was 70.4% and their profit margin was 18.8%. In 20X2, P Co's gross profit ratio was 58.3% and their profit margin was 8.9%. Which of the following is false?

• A) C Co's cost of goods sold was a lower percentage of sales than P Co's.
• B) In 20X2, C Co's profit margin was 111.2% greater than P Co's which would contribute to a higher return on total investment.
• C) The major reason for P Co's lower profit margin is that their selling, general and administrative expenses were double the percentage of sales compared to C Co's percentage.
• D) C Co looks to be a better investment than P Co.

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Definitions:

Units-Of-Activity Method

A method of depreciation that provides for depreciation expense based on each unit of activity of a fixed asset.

Depreciable Cost

The total cost of a tangible asset minus its estimated salvage value, representing the amount subject to depreciation over the asset's useful life.

Estimated Output

The anticipated quantity of products or services that a business expects to produce over a certain period.

Initial Cost

The original cost of acquiring an asset, including the cost of purchase and other expenses necessary to get the asset ready for its intended use.