Under the retail inventory method the estimated cost of ending inventory is computed by multiplying the cost-to-retail ratio by
A) net sales.
B) goods available for sale at retail.
C) goods purchased at retail.
D) ending inventory at retail.

Question

Quizplus · Accepted Answer

The estimated cost of ending inventory under the retail inventory method is computed by multiplying the cost-to-retail ratio by the ending inventory at retail. This is because the cost-to-retail ratio represents the ratio of the cost of the goods to the selling price of the goods, and multiplying this by the ending inventory at retail value will give an estimate of the cost of the inventory that is still on hand at the end of the accounting period.

Under the Retail Inventory Method the Estimated Cost of Ending