The method used to estimate the cost of ending inventory is called:

Question

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The gross profit method is used to estimate the cost of ending inventory by applying a gross profit percentage to the net sales. This method is often used when a physical count of inventory is not possible or not practical. It is not the same as the specific cost of each item, but it provides a reasonable estimate of the cost of goods sold and the cost of ending inventory. The other methods listed (FIFO, LIFO, and average cost) are specific inventory costing methods that determine the cost of each item in inventory, rather than providing an estimate based on overall profitability.

The Method Used to Estimate the Cost of Ending Inventory