The Retail Method

question 46

Multiple Choice

The retail method:

• A) Is not an estimate
• B) Does not require a cost ratio
• C) Eliminates any need ever to take a physical inventory
• D) Aids a company in not having to calculate an inventory cost for each individual item
• E) None of these

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Definitions:

Variable Overhead

Costs that change with production volume but are not directly tied to specific units, such as utilities for the manufacturing plant.

Direct Materials

Raw materials that are directly traceable and allocable to a finished product in the manufacturing process.

Direct Labor-Hours

A unit of measure for the time workers spend producing goods or services, indicative of the labor cost attributed per hour.

Variable Overhead

Costs that vary with production volume, such as utilities or materials, as opposed to fixed overhead costs.