Which of the following inventory valuation methods is only an estimate of actual costs?
A) The retail method.
B) The gross profit method.
C) Both retail and gross profit methods are only estimations.
D) Neither the retail nor the gross profit methods are estimations.

Question

Quizplus · Accepted Answer

Both the retail method and the gross profit method are estimations because they rely on assumptions and calculations to determine the value of inventory. The retail method estimates the cost of inventory by multiplying the retail price by a cost-to-retail ratio, while the gross profit method estimates the cost of inventory by deducting the gross profit percentage from the sales price. Both methods are useful for providing a quick estimate of inventory value but may not reflect actual costs.

Which of the Following Inventory Valuation Methods Is Only an Estimate