Why Is It Better to Use Sales Rather Than Cost

question 32

Multiple Choice

Why is it better to use sales rather than cost of goods sold when calculating the average days sales in inventory value?

• A) The values for COGS are not always comparable across firms
• B) COGS is not the driving variable behind the accumulation of inventory
• C) Inventory is accumulated regardless of its COGS
• D) There are three types of COGS, raw materials, work in progress, and finished goods, and since all are slightly different, using one or the other would make the calculations inaccurate.

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Definitions:

Life Cycle Assessment (LCA)

A technique used to assess the environmental impacts associated with all the stages of a product's life from raw material extraction through materials processing, manufacture, distribution, use, repair and maintenance, and disposal or recycling.

Cradle to Grave

Considering all stages of a product's life cycle, from raw material extraction (cradle) to disposal or recycling (grave).

Renewable Energy

Energy generated from natural processes that are continuously replenished, such as sunlight, wind, and water flow.

Energy Sources

The origins or types of power, such as fossil fuels, renewable energy, or electricity, used to operate machinery, vehicles, and support human activities.