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On July 26, 2012, radio Shack announced disappointing 2nd quarter earnings that caused the stock to fall 29% to all time lows. Although sales were up 1.2% to $953.2 million gross profit fell 16.6% to $360.3 million. Assuming Radio Shack's store count and fixed costs were the same in the 2nd quarter of 2011 and 2012, which of the following statements is the best explanation for the decrease in the firm's profitability?

a) Opportunity costs decreased.

b) Margin of safety decreased.

c) Contribution margin decreased.

d) Selling price decreased.

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