Which of the Following Statements Concerning the Retail Inventory Method

question 34

Multiple Choice

Which of the following statements concerning the retail inventory method of estimating closing stock is incorrect?

• A) It can be applied with or without a physical stocktake being carried out.
• B) A stocktake is carried out, valued at retail and then converted to cost by applying the historical gross profit percentage.
• C) The ratio of cost to retail is goods available for sale at cost divided by the goods available for sale at retail.
• D) Differences in the mix of inventory compared to the mix used to determine the cost ratio does not affect the accuracy of the method.

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Definitions:

Trust

A fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.

Oligopolist

A firm or entity that operates in a market structure characterized by a small number of firms dominating the market, leading to limited competition.

Proctor & Gamble

A multinational corporation specializing in consumer goods ranging from personal care to cleaning products.

Family Farm

A farm owned and operated by a family, typically involving residential family members in its operations.