The gross profit method of determining ending inventory cost

Question

Quizplus · Accepted Answer

The gross profit method estimates the ending inventory by using the gross profit percentage to calculate the cost of goods sold and then subtracting it from the net sales. It can be used without taking a physical count of merchandise, making it a useful tool for businesses that have difficulty or cannot perform a physical inventory count. However, it may not provide accurate information about the number of units in inventory, and it does not require the inventory to be classified into groups of items of about the same rate of markon.

The Gross Profit Method of Determining Ending Inventory Cost