The reasoning behind the retail inventory method is that if an accurate estimate of the cost-to-retail ratio is made, ending inventory at retail can be multiplied by the ratio to estimate ending inventory at cost.

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This is correct. The retail inventory method is based on the assumption that there is a consistent relationship between the cost and retail prices of goods, and that this relationship can be used to estimate the cost of ending inventory based on its retail value. By multiplying ending inventory at retail by the cost-to-retail ratio, we can obtain an estimate of the ending inventory at cost.

The Reasoning Behind the Retail Inventory Method Is That If