Which Statement Best Explains the Gross Margin Method

question 121

Multiple Choice

Which statement best explains the gross margin method?

• A)A method for estimating cost of goods sold by applying an average gross margin to the amount of sales recorded in a period.
• B)A method that assigns costs to inventories and cost of sales based on actual costs of each item.
• C)A method of estimating the cost of ending inventory by applying an average sales margin to the retail price of products.
• D)This method is least appropriate for inventory items that are not distinguishable from one another.

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Definitions:

Joint Ventures

A commercial enterprise undertaken jointly by two or more parties that otherwise retain their distinct identities.

Taxed

Subject to a compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization.

Formal Agreement

A legally binding contract or document established between two or more parties, outlining specific terms and conditions that are enforceable by law.

Distributorship

A type of franchise in which the franchisor manufactures a product and licenses a dealer to sell the product in an exclusive territory.