Gross profit margin rises with lower costs relative to sales

Steps:

• Recall gross profit margin formula: (Sales revenue - Cost of goods sold) / Sales revenue.
• Identify that an increase requires higher gross profit relative to sales, often from reduced COGS.
• Evaluate options: changes in prices directly impact COGS or sales; quantity changes alone do not alter per-unit margins.
• Select the option that lowers COGS without reducing sales.

Why C is correct:

• A decrease in purchase price reduces cost of goods sold (COGS), increasing gross profit while sales remain unchanged, per the margin formula.

Why the others are wrong:

• A: Decreasing selling price lowers sales revenue, reducing the margin.
• B: Increasing quantity purchased raises total COGS without affecting per-unit costs or sales prices.
• D: Increasing quantity sold boosts sales but proportionally increases COGS, leaving margin unchanged.

Final answer: C