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Your comparison of the gross margin percent for Jones Drugs for the years 2013 through 2016 indicates a significant decline. This is shown by the
Your comparison of the gross margin percent for Jones Drugs for the years 2013 through 2016 indicates a significant decline. This is shown by the following information: (Click the icon to view the information.) The following additional information is obtained from independent sources and the client's records as a means of investigating the controller's explanations: (Click the icon to view the additional information.) Requirements Evaluate the explanation provided by Adams. Show calculations to support your conclusions. h Which specific aspects of the client's financial statements require intensive investigation in this audit? Requirement a. Evaluate the explanation provided by Adams. Show calculations to support your conclusions. First, compute the gross margin percentage for drug sales for 2016 through 2013, then compute the gross margin percentage for nondrug sales for 2016 through 2013. (Round your answers to the nearest tenth percent, XX.X%.) Drugs 2016 2015 96 2014 2013 - X - Data Table 2016 2015 2014 2013 $ $ S s 14,211 9.223 12.916 8.268 11,482 7.313 10.351 6,573 Sales (thousands) CGS (thousands) Gross margin Percent $ 4,988 $ $ $ 4,650 38.0 4.149 38.2 3.778 38.5 35.1 A discussion with Marilyn Adams, the controller, brings to light two possible explanations. She informs you that the industry gross profit percent in the retail drug industry declined fairly steadily for three years, which accounts for part of the decline. A second factor was the declining percent of the total volume resulting from the pharmacy part of the business. The pharmacy sales represent the most profitable portion of the business, yet the competition from discount drugstores prevents it from expanding as fast as the nondrug items such as magazines, candy, and many other items sold. Adams feels strongly that these two factors are the cause of the decline. Print Done - X More Info Nondrug Cost of Goods Sold Industry Gross Profit Percent for Retailers of Drugs and Related Products 32.7 Drug Sales 2016 s Jones Drugs ($ in thousands) Drug Cost of Nondrug Sales Goods Sold $ 9.085 s 3.045 2.910 6.641 2.791 5.732 2,665 5,128 5.051 $ 2015 7.865 6.178 5,347 4.522 3.908 32.0 33.0 2014 4.821 4.619 2013 33.2 Print Done
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