Practice prompt · Q:statement-presentation-comprehensive-income-and-disclosure/practice-margin-change

Compare gross margins

Compare a dollar increase with a falling gross margin.

Updated Sep 13, 2026 Review due Dec 13, 2026

Practice

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In one year, revenue is $800 thousand and cost of revenue is $480 thousand. In the next, revenue is $1,000 thousand and cost of revenue is $620 thousand. A manager says the $60 thousand increase in gross profit proves the gross margin improved. Which response is supported by the figures?

Choose the best answer. a Gross margin improved by $60 thousand. b Gross margin stayed at 40% because both revenue and gross profit rose. c Gross profit rose, but gross margin fell from 40% to 38%. d Gross margin rose from 40% to 47.5%.

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Answer: c

Gross profit rose from $320 to $380 thousand, but gross margin fell from 40% ($320 ÷ $800) to 38% ($380 ÷ $1,000).