Which Statement Best Explains the Retail Inventory Method

question 113

Multiple Choice

Which statement best explains the retail inventory 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:

FICA

The Federal Insurance Contributions Act, a U.S. law that mandates a payroll tax on both employees and employers to fund Social Security and Medicare.

Monthly Wage Base

The total amount of money earned by an employee in a month before deductions.

Collective Bargaining Agreement

A contract negotiated by an employer and a labor union that covers all issues related to employment.

OSHA

The Occupational Safety and Health Administration, a U.S. government agency responsible for ensuring safe and healthy working conditions.