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Gordon has had the following financial results for the last four years:

Gordon has had the following financial results for the last four years:

                                            Year 1         Year 2               Year 3                    Year 4


Sales                          $1,250,000      $1,300,000         $1,359,000         $1,400,000


Cost of Goods Sold     750,000              785,000             825,000            850,000


Gross Profit                  $500,000             $515,000           $534,000          $550,000


Inflation Factor                1.00                       1.03                         1.07             1.10


Gordon has analyzed these results using vertical common-size analysis to determine trends. The performance of Gordon can best be characterized by which one of the following statements?

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The common-size gross profit percentage has decreased as a result of an increasing common-size trend in cost of goods sold.

The common-size trend in sales is increasing and is resulting in an increasing trend in the common-size gross profit margin.

The common-size trend in cost of goods sold is decreasing, which is resulting in an increasing trend in the common-size gross profit margin.

The increased trend in the common-size gross profit percentage is the result of both the increasing trend in sales and the decreasing trend in cost of goods sold.

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