why is cost-benefit analysis considered a utilitarian model of evaluation
Cost–benefit analysis Cost–benefit analysis is often used by organizations to appraise the desirability of a given policy. It is an analysis of the expected balance of benefits and costs, including an account of foregone alternatives and the status quo. CBA helps predict whether the benefits of a policy outweigh its costs, and by how much relative to other alternatives, so that one can rank alternate policies in terms of the cost–benefit ratio.[3] Generally, accurate cost–benefit analysis identifies choices that increase welfare from a utilitarian perspective. Assuming an accurate CBA, changing the status quo by implementing the alternative with the lowest cost–benefit ratio can improve Pareto efficiency.[4] While CBA can offer a well-educated estimate of the best alternative – perfect appraisal of all present and future costs and benefits is difficult –, perfection in terms of economic efficiency and social welfare are not guaranteed.[5]
Cost of goods sold Costs are associated with particular goods using one of the several formulas, including specific identification, first-in first-out (FIFO), or average cost. Costs include all costs of purchase, costs of conversion and other costs that are incurred in bringing the inventories to their present location and condition. Costs of goods made by the businesses include material, labor, and allocated overhead. The costs of those goods which are not yet sold are deferred as costs of inventory until the inventory is sold or written down in value.