The conventional retail inventory method is based on:
A) Average cost.
B) LIFO cost.
C) Average, lower of cost or net realizable value.
D) LIFO, lower of cost or net realizable value.

Question

Quizplus · Accepted Answer

The conventional retail inventory method is based on the cost-to-retail ratio, which involves dividing the cost of the inventory by its retail value to determine a markup percentage. This markup percentage is then applied to the ending inventory at retail to determine its cost. Additionally, this method requires applying the lower of cost or net realizable value rule to ensure proper valuation of inventory. Therefore, option C – average, lower of cost or net realizable value – is the best choice as it meets both requirements of the conventional retail inventory method.

The Conventional Retail Inventory Method Is Based On