Inventory Methods

Which of the following methods for measuring inventory would least likely require knowing the approximate cost of material and labour?

A) Standar Cost

B)Cost Method

C)Retail Method

Answer B

The retail method reduces sales by gross profit to calculate cost hense knowing cost of material is not required

gross profit = Revenue - COGS…so you need to know COGS. The question is a bit confusing though.

Is answer B correct? If so, then cost method requires exact cost of L M to value an inventory. Standard costing requires approxmation of cost and % of these cost are assigned to inventory. Regarding Retail method, it does require approximation of Direct manufacturing costs or else how will you know what is your gp margin?

Alternative view point provided answer B is correct.

Not sure, that’s a tricky one. It’s been too long since I’ve reviewed this chapter but will be reviewing it soon. Maybe one of the veterans on here can address this question…i’d like to know the logic here as well.