The Gross Profit Method Is Often Used to Estimate the Cost

question 69

Multiple Choice

The gross profit method is often used to estimate the cost of ending inventory. The gross profit method should not be used to ________.

• A) determine the cost of ending inventory during an interim period without performing a physical count
• B) determine the cost of ending inventory for an annual financial statement
• C) determine the cost of inventory that has been stolen or destroyed
• D) develop budgets

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Definitions:

Inventory Turnover

A ratio indicating how many times a company has sold and replaced inventory during a certain period of time.

Labor Costs

Expenditures related to employing staff, including wages, benefits, and taxes.

Supply Chain

The entire system of producing and delivering a product or service, from the very beginning of sourcing the raw materials to the final delivery of the product or service to end consumers.

Net Value

The difference between the total benefits and total costs of an investment or action, taking into account all relevant financial factors.