If the cost ratio used in the retail inventory method were overstated (e.g., 80 percent instead of 70 percent), the estimated cost of ending inventory would be:
A) more than its retail value.
B) correctly stated.
C) overstated.
D) understated.

Question

Quizplus · Accepted Answer

If the cost ratio used in the retail inventory method were overstated (80% instead of 70%), it would mean that the estimated cost of ending inventory would be calculated based on a higher cost-to-retail ratio. This would result in an overestimation of the cost of ending inventory, making the inventory value overstated. Therefore, the correct answer is option C) overstated.

If the Cost Ratio Used in the Retail Inventory Method