In Doing Vertical Analysis of an Income Statement, You Notice

Multiple Choice

In doing vertical analysis of an income statement, you notice that cost of goods sold increased from 50% of sales in year 1 to 60% of sales in year 2. All of the following are possible explanations except:

A) Inventory costs rose faster than sales prices.
B) Inventory is being stolen.
C) The accounting records are not accurate.
D) All of the above are possible explanations.