The retail inventory method of estimating inventory can be used to estimate the amount of inventory shortage if a physical count is also done.

Question

Quizplus · Accepted Answer

The retail inventory method involves calculating the estimated cost of inventory by applying a cost-to-retail ratio to the total retail value of the merchandise. If a physical count is done in addition to using this method, the difference between the calculated inventory value and the actual physical count can be used to determine if there is an inventory shortage or overage. Therefore, the statement is true.

The Retail Inventory Method of Estimating Inventory Can Be Used