Which of the following inventory valuation methods is only an estimate of actual costs?
A)Only the retail method.
B)Only the gross profit method.
C)Both retail and gross profit methods are only estimations.
D)Neither the retail nor the gross profit methods are estimations.

Question

Quizplus · Accepted Answer

Both the retail and gross profit methods rely on estimates of actual costs and are not exact, precise measurements of inventory valuation. The retail method estimates the cost of goods sold by applying a cost-to-retail percentage to the retail value of ending inventory, while the gross profit method estimates the cost of goods sold by subtracting the estimated gross profit margin percentage from net sales.

Which of the Following Inventory Valuation Methods Is Only an Estimate