Which Statement Is Not Correct About the Retail Inventory Method

question 142

Multiple Choice

Which statement is not correct about the retail inventory method?

• A)It is an alternative to using a cost flow assumption.
• B)It is acceptable for annual financial reporting in Canada.
• C)It should only be used if reliable information is available about profit margins.
• D)It is a method that estimates ending inventory by applying an average sales margin.

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Definitions:

Weighted-Average Method

An inventory costing method that calculates the cost of ending inventory and the cost of goods sold based on the average cost of all goods available for sale during the period.

Conversion Costs

The combination of direct labor costs and manufacturing overhead costs, representing the costs to convert raw materials into finished products.

Processing Department

A section or unit within a manufacturing facility where a specific type of processing or operation is carried out.

Work in Process

Inventory items that are partially completed in manufacturing or production but not yet ready for sale.