Which of the following statements best reflects a goal for cost of goods sold as a percentage of sales?

The goal for cost of goods sold (COGS) as a percentage of sales is primarily focused on maintaining operational efficiency and profitability. Keeping this percentage as low as possible is advantageous for a business because it indicates that a smaller proportion of revenue is being consumed by the direct costs associated with producing goods. This ultimately allows for a higher gross margin, which is critical for sustaining profitability and facilitating reinvestment into the business.

Lowering the COGS percentage means that a company can either retain more of its revenue as profit or potentially offer competitive pricing to encourage sales, both of which are beneficial for long-term success. Additionally, managing COGS effectively contributes to better cash flow management, which is essential for day-to-day operations.

Maximizing or minimizing the percentage indiscriminately can lead to adverse effects. An overly high percentage indicates rising costs relative to sales, suggesting inefficiencies or higher supplier costs, whereas minimizing costs too aggressively could compromise product quality. Equalizing the percentage across all products may not reflect the realities of different product lines, where some might naturally have higher costs due to factors like materials, complexity, or market demand.

Therefore, the strategy of keeping the percentage as low as possible aligns with overall business objectives of maintaining competitive advantage and profitability.