The Retail Inventory Method Is Based on the Assumption That

question 166

Multiple Choice

The retail inventory method is based on the assumption that the

• A) final inventory and the total of goods available for sale contain the same proportion of high-cost and low-cost ratio goods.
• B) ratio of gross margin to sales is approximately the same each period.
• C) ratio of cost to retail changes at a constant rate.
• D) proportions of markups and markdowns to selling price are the same.

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Definitions:

Materials Price Variance

The difference between the actual unit price paid for an item and the standard price, multiplied by the quantity purchased.

Standard Quantity

The expected or established quantity of materials or labor expected to be used during a manufacturing process or production cycle.

Standard Price

Standard price is the pre-determined cost that a company expects to pay for goods, materials, or services, used in budgeting and cost control.

Actual Output

Actual output is the real quantity of goods or services produced by a company or economy, as opposed to planned or theoretical outputs.