Asked by Breana Gordon on May 12, 2024
Verified
A method that uses average gross profit rate and net sales to compute inventory is:
A) the retail method.
B) the gross profit method.
C) the weighted-average method.
D) None of these answers is correct.
Gross Profit Method
An accounting technique used to estimate inventory levels and cost of goods sold by applying a consistent gross profit percentage to sales figures.
Retail Method
An inventory accounting method used in retail, estimating the ending inventory value based on the relationship between cost and retail price.
Weighted-Average Method
An inventory costing method that calculates the cost of goods sold and ending inventory based on the average cost of all units available.
- Evaluate the retail method for estimating ending inventory.
Verified Answer
JB
joana bonillaMay 12, 2024
Final Answer :
B
Explanation :
The gross profit method estimates inventory by using the average gross profit rate and net sales. It is often used for interim financial statements or when inventory is destroyed or stolen.
Learning Objectives
- Evaluate the retail method for estimating ending inventory.