The president of vigor company was informed that production cost were 3% lower in 20CY than that of 20PY. Statistics Shown by the selling division indicated that quantity sold in 20CY was significantly greater than quantity sold in 20PY

The president is wandering why, despite the favorable information provided by the selling and production division. gross margin for 20PY was still higher than that of 20CY as shown below

December 31

20 PY 20 CY

Net sales 1,305,000 1,160,000

Cost of sales 843,900 696,000

Gross margin 461,100 464,000

make a statement of accounting for the changes in Gross margin that will show details of changes using

a) two way analysis (three factor)

b) three way analysis (three factor)