Multiple Choice
Firms achieve ________ through efficient procedures and excellent supply chain management.
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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Which of the following is NOT a function of inventory?
A
To increase the cost of goods sold
B
To enable bulk purchasing discounts
C
To facilitate production scheduling
D
To buffer against fluctuations in demand
Verified step by step guidance1
Understand the concept of inventory: Inventory refers to the goods and materials that a business holds for the purpose of resale or production. It serves several functions in the business process.
Review the functions of inventory: Inventory is used to facilitate production scheduling, buffer against fluctuations in demand, and enable bulk purchasing discounts. These are typical functions that help businesses operate efficiently.
Analyze the incorrect option: The statement 'To increase the cost of goods sold' does not align with the purpose of inventory. Inventory management aims to optimize costs, not increase them unnecessarily.
Relate inventory to cost of goods sold (COGS): COGS represents the direct costs attributable to the production of goods sold by a company. While inventory impacts COGS, its function is not to increase it but to manage it effectively.
Conclude the reasoning: Based on the analysis, the incorrect option is 'To increase the cost of goods sold,' as this does not align with the typical functions of inventory in financial accounting.
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