Retail inventory method,

Definition of Retail inventory method:

1. Ending-inventory value estimation method based on the relationship between cost and retail price. It entails these steps: (1) maintaining detailed record of all purchases and on-hand goods at both cost price and retail price, (2) computing a cost-to-retail percentage (Formula: Cost price x 100 ÷ Retail price), (3) estimating ending-inventory at retail prices by subtracting the retail price of goods sold from the retail price of goods in inventory, and (4) converting the estimated inventory at retail price to cost price by applying the cost-to-retail percentage computed in step #2. Also called retail inventory estimation method.

2. Also, called the cost-to-retail percentage, the measurement provides how much a good's retail price is made up of costs. If, for example, an iPhone costs $300 to manufacture and it sells for $500 each, the cost-to-retail ratio is 60% (or $300/$500) * 100 to move the decimal.

3. The retail inventory method is an accounting method used to estimate the value of a store's merchandise. The retail method provides the ending inventory balance for a store by measuring the cost of inventory relative to the price of the merchandise. Along with sales and inventory for a period, the retail inventory method uses the cost-to-retail ratio.

How to use Retail inventory method in a sentence?

1. The retail inventory method is an accounting method used to estimate the value of a store's merchandise.
2. The retail method provides the ending inventory balance for a store by measuring the cost of inventory relative to the price of the goods.
3. Along with sales and inventory for a period, the retail inventory method uses the cost-to-retail ratio.