Which of the following is the recommended approach to forecast COGS,and why?
A)Forecast COGS based on revenue growth,since it provides flexibility in the model.
B)Forecasting COGS based on the forecast ratio of COGS to sales allows for possible improvements in COGS relative to sales.
C)Forecast COGS based on revenue growth since COGS and revenues have a direct relationship.
D)Forecasting COGS based on inventory is recommended because inventory prices and COGS are correlated.

Question

Quizplus · Accepted Answer

Forecasting COGS based on the forecast ratio of COGS to sales allows for possible improvements in COGS relative to sales. This approach takes into account the potential for changes in the cost of goods sold relative to sales, and allows for a more accurate forecast of expenses. It also provides a more stable and consistent approach to forecasting COGS, as changes in revenue growth may not necessarily imply corresponding changes in COGS. Forecasting based on inventory prices (option D) may be useful in some cases, but it does not take into account fluctuations in sales volume or changes in production efficiency, which can have a significant impact on COGS.

Which of the Following Is the Recommended Approach to Forecast