Asked by Clayton Scheutzow on Jun 26, 2024
Verified
The gross profit method may be used to estimate the cost of inventory.
Required:
a. List four situations when it might be appropriate to use the gross profit method to estimate the cost of inventory.
b. Discuss the potentiat disadvantages of the gross profit method.
Gross Profit Method
A method used in accounting to estimate the value of a company's inventory by applying the gross margin ratio to net sales.
Inventory
Consists of the goods and materials a business holds for the purpose of resale or production.
- Recognize the practical applications and limitations of the gross profit method for estimating inventory cost.
Verified Answer
MN
Learning Objectives
- Recognize the practical applications and limitations of the gross profit method for estimating inventory cost.