If Net Sales Decreases and Cost of Goods Sold Increases

question 43

Multiple Choice

If net sales decreases and cost of goods sold increases, the gross profit percentage:

• A)remains the same.
• B)decreases.
• C)increases.
• D)will change based upon the change in total assets.

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Definitions:

Variable Costing Income (VCI)

An accounting method that includes only variable costs—costs that change with production level—in calculating net income.

Full Costing Income (FCI)

A method of accounting that allocates all fixed and variable costs to products, operations or projects to determine profitability.

Consolidated Accounts

Financial statements that represent the combined financial activities of a parent company and its subsidiaries.

Absorption Costing

A costing approach that encompasses all costs associated with production, namely direct materials, direct labor, and both variable and fixed overheads, in the product's final cost.