PRC-1 · Chapter 7 · Question 79 of 100
Which of the following best describes the 'Retail Method' of estimating inventory cost?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Deducing cost by reducing the sales value of the inventory by the appropriate percentage gross margin.
Explanation
The retail method is often used in the retail industry for rapidly changing items with similar margins. The cost is approximated by taking the total retail value of inventory and reducing it by the expected gross margin.
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