Once the correct price is recorded, what will be the effect on the factory costs incurred and the gross profit margin (GP%)?

ABC manufactures vehicle engines and purchases components from a supplier Each engine requires one component costing $10 each ABC’s supplier otters a 5% volume discount which has always been taken, this reduces the cost to $9.50 each. However, ABC has recorded the cost as $10 throughout the accounting system

Once the correct price is recorded, what will be the effect on the factory costs incurred and the gross profit margin (GP%)?

A)

B)

C)

D)

A . Option A
B . Option B
C . Option C
D . Option D

View Answer

Answer: D