Under the retail inventory method, if the gross profit ratio is 40% and ending inventory at retail is
$45,000, then estimated ending inventory is $27,000.

Question

Quizplus · Accepted Answer

The retail inventory method estimates the ending inventory at cost by applying the gross profit ratio to the ending inventory at retail. In this case, the gross profit ratio is 40%, which means that the cost of goods sold is 60% of the retail price. Therefore, the estimated ending inventory at cost is $45,000 x 60% = $27,000.

Under the Retail Inventory Method, If the Gross Profit Ratio