A major advantage of the retail inventory method is that it
A) provides reliable results in cases where the distribution of items in the inventory is different from that of items sold during the period.
B) hides costs from competitors and customers.
C) gives a more accurate statement of inventory costs than other methods.
D) provides a method for inventory control and facilitates determination of the periodic inventory for certain types of companies.

Question

Quizplus · Accepted Answer

The retail inventory method provides a method for inventory control and facilitates determination of the periodic inventory for certain types of companies, making option D the best choice. Option A is incorrect because the retail inventory method assumes that the distribution of items in the inventory is similar to the distribution of items sold during the period. Option B is incorrect because the retail inventory method is a costing method, and therefore does not hide costs from competitors or customers. Option C is incorrect because the retail inventory method may not provide a more accurate statement of inventory costs than other methods such as the weighted average cost method or the specific identification method.

A Major Advantage of the Retail Inventory Method Is That