Under the retail method, the amount of ending merchandise inventory is estimated by using the ratio of the:

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Quizplus · Accepted Answer

Under the retail method, ending merchandise inventory is estimated by using the ratio of the goods available for sale at cost to the goods available for sale at retail. This is because the method assumes a consistent markup percentage on merchandise from cost to retail. Therefore, the ratio of cost to retail can be used to estimate the dollar amount of ending inventory at retail.

Under the Retail Method, the Amount of Ending Merchandise Inventory