Accounting Multiple Choice Question – 30 July 2022

A company’s gross profit ratio for the year ended 31 December 2020 was 25%.

This increases to 30% for the year ended 31 December 2021.

What could have been responsible for the increase?

Select ONE answer:

1. an increase in the cost of purchases during 2021
2. an increase in the volume of sales during 2021
3. an over-valuation of stock at 31 December 2021
4. an under-valuation of stock at 31 December 2021

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct ==> Higher Value Of Stock means Lower COS, therefore higher GM
4. Not correct

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