Question

Ex. 41: You prepare a comparative analysis of an automobile dealership. What questions should you ask?

	2014	2015	2016
Gross Receipt	$3,000,000	$4,000,000	$5,000,000
Cost of Sales	$2,800,000	$3,850,000	$4,900,000
Expenses	$180,000	$140,000	$95,000
Gross Profit	$20,000	$10,000	$5,000
Gross Profit %	0.67%	0.25%	0.10%

Answer 1

Question 1 - Reasons for disproportionate increase in cost of sales.

Question 2 - Cost of sales is assumed to be variable. Why is it not in line with the increase in sales percentage or value?

Question 3 - Impact on Gross Profit or Gross profit %. The increase in Cost of Sales has led to decrease in Gross profit, why do the need to increase sales and reduce its profits?