What Is the Difference Between the Gross Margin and the Retail

question 124

Essay

What is the difference between the gross margin and the retail method for estimating ending inventory?

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Definitions:

Variable Manufacturing Overhead

Costs that vary with the level of manufacturing activity, including items like indirect materials and utilities.

Fixed Manufacturing Overhead

These are the manufacturing costs that do not vary with the volume of production, including costs like rent, insurance, and salaries for certain employees.

Machine-Hours

The total hours that machinery is operational and in use on the production floor.

Variable Manufacturing Overhead

Costs that vary with production output levels, such as utilities and indirect materials, associated with manufacturing.