Johnson Corporation sells primarily two products:

(A) Consumer cleaners and

(B) Industrial purifiers. Its gross margin and components for the past two years are as follows:

In Year 6, the selling price of A is $5 per unit, while in Year 7 it is $6 per unit. Product B sells for $50 per unit in both years. Security analysts and the business press expressed surprise at Johnson’s 12.5% increase in sales and $4,500 decrease in gross margin for Year 7.

Required:
Prepare an analysis statement of the change in gross margin for Year 7 versus Year 6. Discuss and show the effects of changes in quantities, prices, costs, and product mix on grossmargin.

Transcribed Image Text:

Year7 Year 6 Sales revenue Product A.. .$60,000 $35,000 Product B 30,000 45,000 Total .. 90,000 80,000 Deduct cost of goods sold Product A . 50,000 28,000 19,500 27,000 - 69,500 55,000 Gross margin$20,500 $25,000 Total