1. Read the 2018 vs 2017 comparative analysis for Cost of Sales and Gross Margin in Exhibit A. If you needed further clarification, which of the following questions could you ask your accountant?
   1. Why did favorable supply chain productivity help offset higher costs in 2018 vs 2017?
   2. To confirm, higher transportation costs (freight and logistics) caused a decrease in gross margin in 2018 as compared to 2017?
   3. Why did additional plant costs due to new production lines and an unfavorable product mix contribute to a lower gross margin in 2018 as compared to 2017?
   4. All of the above questions could add clarification to your understanding.

CONSOLIDATED RESULTS OF OPERATIONS Percent Change 2018 vs 2017 2017 vs 2016 2018 2017 2016 S S S 1.0% 7,7911 4,215.7 3,575.4 45.9% 7,515.4 4,060.0 3,455.4 46.0% 3.7% 3.8% 3.5% 9.0% For the years ended December 31, In millions of dollars except per share amounts Net Sales Cost of Sales Gross Profit Gross Margin SM&A Expense SM&A Expense as a percent of ner sales Long-Lived and Intangible Asset Impairment Charges Business Realignment Costs Operating Profit Operating Profit Margin Interest Expense, Net 7,440.2 4.270.6 3,169.6 42.6% 1,891.3 25.4% 4.2 (0.69% (0.3)% 1,885.5 25.1% 208.7 47.8 1,313.4 17.5% 98.3 24.1% 57.7 19.1 1,623.8 20.8% 138.8 18.9 (72.37% (60.00% 23.6% NM 153.3% 4.6% 1,255.2 16.9% 90.2 41.3% 9.0% 59.4% 104.4 354.1 (28.49% (32.5)% (6.79% 74.8 239,0 17.0% 1,171.2 65.6 379.4 34.5% 720.0 31.9% 756.6 54.8 % 5.1 % Other (Income) Expense, Net Provision for Income Taxes Ellective Income Tax Rate Net Income Including Noncontrolling Interest Less: Net Loss Attributable to Noncontrolling Interest Net Income Attributable to The Hershey Company Net Income Per Share-Diluted NM (6,5) 1.177.7 5.58 $ S S (26.4) 783.0 3.66 S S 8.7% NM 50.4% 52.5% 720.0 3.34 9.6% Note: Percentage changes may not compute directly as shown due to rounding of amounts presented above. NM not meaningful. Net Sales 2018 compared with 2017 Net sales increased 3.7% in 2018 compared with 2017, reflecting a benefit from the recent Amplify and Pirate Brands acquisitions of 3.6% and a volume increase of 1.3%, partially offset by unfavorable price realization of 1.0% and an unfavorable impact from foreign currency exchange rates of 0.2%. Excluding the unfavorable impact from foreign currency exchange rates, our net sales increased 3.9%. Consolidated volumes increased due to the acquisitions of Amplify and Pirate Brands, as well as solid performance in select interational markets, which more than offset the volume reduction resulting from the sale of SGM in July 2018. The net increase in volume was partially offset by unfavorable net price realization, which was primarily attributed to incremental trade promotional expense in the North America segment in support of 2018 programning. CONSOLIDATED RESULTS OF OPERATIONS Percent Change 2018 vs 2017 2017 vs 2016 2018 2017 2016 S S S 1.0% 7,7911 4,215.7 3,575.4 45.9% 7,515.4 4,060.0 3,455.4 46.0% 3.7% 3.8% 3.5% 9.0% For the years ended December 31, In millions of dollars except per share amounts Net Sales Cost of Sales Gross Profit Gross Margin SM&A Expense SM&A Expense as a percent of ner sales Long-Lived and Intangible Asset Impairment Charges Business Realignment Costs Operating Profit Operating Profit Margin Interest Expense, Net 7,440.2 4.270.6 3,169.6 42.6% 1,891.3 25.4% 4.2 (0.69% (0.3)% 1,885.5 25.1% 208.7 47.8 1,313.4 17.5% 98.3 24.1% 57.7 19.1 1,623.8 20.8% 138.8 18.9 (72.37% (60.00% 23.6% NM 153.3% 4.6% 1,255.2 16.9% 90.2 41.3% 9.0% 59.4% 104.4 354.1 (28.49% (32.5)% (6.79% 74.8 239,0 17.0% 1,171.2 65.6 379.4 34.5% 720.0 31.9% 756.6 54.8 % 5.1 % Other (Income) Expense, Net Provision for Income Taxes Ellective Income Tax Rate Net Income Including Noncontrolling Interest Less: Net Loss Attributable to Noncontrolling Interest Net Income Attributable to The Hershey Company Net Income Per Share-Diluted NM (6,5) 1.177.7 5.58 $ S S (26.4) 783.0 3.66 S S 8.7% NM 50.4% 52.5% 720.0 3.34 9.6% Note: Percentage changes may not compute directly as shown due to rounding of amounts presented above. NM not meaningful. Net Sales 2018 compared with 2017 Net sales increased 3.7% in 2018 compared with 2017, reflecting a benefit from the recent Amplify and Pirate Brands acquisitions of 3.6% and a volume increase of 1.3%, partially offset by unfavorable price realization of 1.0% and an unfavorable impact from foreign currency exchange rates of 0.2%. Excluding the unfavorable impact from foreign currency exchange rates, our net sales increased 3.9%. Consolidated volumes increased due to the acquisitions of Amplify and Pirate Brands, as well as solid performance in select interational markets, which more than offset the volume reduction resulting from the sale of SGM in July 2018. The net increase in volume was partially offset by unfavorable net price realization, which was primarily attributed to incremental trade promotional expense in the North America segment in support of 2018 programning