Grand Office Supply reported the following gross profit percentages: 2017: 37.5%; 2018: 36.2%; 2019: 20.8%. The industry average is 35%. What are some possible reasons for the decline in 2019?
What will be an ideal response?
Possible reasons include: There could be errors in recording net sales or cost of goods sold.
Employees could have lowered the selling prices to meet sales quotas or earn higher commissions.
There could be inventory thefts by employees or customers. There may have been price increases on
purchases of merchandise inventory that may not have been reflected in sales prices. The area in which
Grand Office Supply does business may have suffered declines that are not reflected in the industry
averages.
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