The Gross Profit Method of Estimating Inventory Would Not Be

question 41

Multiple Choice

The gross profit method of estimating inventory would not be useful when

• A) a periodic system is in use and inventories are required for interim statements.
• B) inventories have been destroyed or lost by fire, theft, or other casualty, and the specific data required for inventory valuation are not available.
• C) there is a significant change in the mix of products being sold.
• D) the relationship between gross profit and sales remains stable over time.

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Definitions:

Expected Value

The long-term average value of a random variable, representing its mean outcome over an infinite number of trials.

Point Estimate

A single value that serves as the best guess or most likely value for a population parameter based on sample data.

Population Parameter

A numerical value that describes a characteristic of a population, such as mean, standard deviation, proportion, etc., usually estimated through samples.

Larger Sample Sizes

Refers to increasing the number of observations in a study to improve the reliability and validity of statistical inferences.