Certified Materials and Resource Professional Practice

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Which of the following has the greatest impact on the revenues of a manufacturer?

The cost of materials

The cost of goods sold

Revenue for a manufacturer is primarily determined by the relationship between sales and production costs. The cost of goods sold (COGS) directly affects a manufacturer's revenue by representing the total expenses incurred to produce the goods sold. This figure is crucial because it includes direct costs tied to the production process, such as materials and labor, and is used to calculate gross profit. A lower COGS typically leads to a higher gross profit margin, ultimately enhancing overall revenue.

While the cost of materials, labor, and overhead costs also contribute to the COGS, the focus on COGS as a whole provides a comprehensive view of how these factors interact to influence revenue. Hence, monitoring and managing COGS is essential for manufacturing businesses to maximize their revenue potential effectively.

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The cost of labor

The overhead costs

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