Gross Profit and Sales Mix
After analyzing Coyote Canyon Outfitter’s Income statement you notice the sales are 20% higher than last year. You also notice the net income is 15% higher. Also, according to your calculations the gross profit has declined from 60% to 50% and Research and Development has increased by 15%. Please comment on these observations. Be specific.
- Is an increase in sales always good?
- Why might sales increase 20% but net income increase only 15%?
- What might cause the gross profit percent to decline?
- How would the increase in R&D affect the net income?
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