The Gross Margin Method Is a Method for Estimating Inventory

question 116

Essay

The gross margin method is a method for estimating inventory based on the assumption that a constant gross margin estimated on recent sales can be used to estimate inventory values from current sales.The gross margin method is not acceptable for use in external financial statements,but can be used to test the accuracy of other cost flow assumptions.
Required:
Identify reasons that make the gross margin method unacceptable for external financial statements.

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Definitions:

Orienting System

A cognitive mechanism that directs attention towards novel or significant stimuli in one's environment.

Still-Face Paradigm

A research technique for assessing infant coping strategies. The infant is seated facing the mother who is instructed to interact in normally pleasant and playful ways at first and then is asked to change her behavior and to be completely unresponsive or withdrawn.

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A psychological concept referring to the mechanism involved in experiencing and processing negative emotions and mood states, such as sadness, anger, and fear.

Coping

The process of managing and dealing with stressors or challenging situations in an effective way.