Under the retail inventory method,if the gross profit ratio is 40% and ending inventory at retail is $55,000,then estimated ending inventory is $33,000.

Question

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The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to the ending inventory at retail. In this case, the gross profit ratio is 40%, and the ending inventory at retail is $55,000. Therefore, the estimated ending inventory is $55,000 x 40% = $33,000.

Under the Retail Inventory Method,if the Gross Profit Ratio Is