The gross profit method is based on the assumption that the rate of gross profit remains constant from one year to the next.

The gross profit method is used to estimate the cost of goods sold by multiplying the gross profit rate by the sales for the period. It assumes that the rate of gross profit will remain constant from one year to the next. However, this assumption may not always hold true in reality, particularly if there have been significant changes in the cost of goods sold or the pricing strategy of the company.