Under the Retail Inventory Method, the Estimated Cost of Ending

question 110

Multiple Choice

Under the retail inventory method, the estimated cost of ending inventory is computed by multiplying the cost-to-retail ratio by

• A)net sales.
• B)goods available for sale at retail.
• C)goods purchased at retail.
• D)ending inventory at retail.

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Definitions:

Capital Goods

Goods that are used in producing other goods and services rather than being bought by consumers.

Opportunity Cost

The cost of forgoing the next best alternative when a decision is made to choose one option over another.

Production Possibilities Curve

A graphical representation showing the maximum quantity of goods and services that a society can produce with existing resources and technology, underlining the concept of opportunity cost.

Consumer Goods

Goods produced for direct consumption by the end customer, as opposed to goods used in the production of other goods.