The gross profit method can be used to approximate the dollar amount of inventory on hand.

Question

Quizplus · Accepted Answer

The gross profit method involves estimating the cost of goods sold and subtracting it from the total sales to calculate gross profit. By knowing the gross profit percentage, the cost of goods sold can be estimated and then subtracted from the total cost of inventory to arrive at an estimate of the dollar amount of inventory on hand.

The Gross Profit Method Can Be Used to Approximate the Dollar