Which Statement Best Explains the Difference Between the Retail Inventory

question 39

Multiple Choice

Which statement best explains the difference between the retail inventory and gross margin methods?

• A)The retail inventory method estimates cost of goods sold by applying an average gross margin to the amount of sales recorded for the period.
• B)The retail inventory method estimates ending inventory cost using wholesale prices and an average gross margin.
• C)The gross margin method calculates an estimated ending inventory balance by using the inventory cost flow equation.
• D)The gross margin method calculates an estimate of cost of goods sold using the inventory cost flow equation.

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Definitions:

Economic Profit

The profit a business makes after deducting both its explicit and implicit costs, including opportunity costs.

Normal Rate of Return

The standard profit or return that is anticipated on an investment, considering the levels of risk and market conditions.

Computer Software Industry

The sector involved in the development, maintenance, and publication of software that offers different types of services or functions for computer users.

Computer Industry

Refers to the business sector involved in the development, manufacturing, and sale of computers, computer components, and software.