Which Statement Best Explains the Difference Between the Retail Inventory

Multiple Choice

Which statement best explains the difference between the retail inventory and gross margin methods?

A) The gross margin method estimates cost of goods sold by applying an average gross margin to the amount of sales recorded for the period.
B) The gross margin method estimates ending inventory cost using retail prices and an average gross margin.
C) The retail inventory method estimates cost of goods sold by applying an average gross margin to the amount of sales recorded for the period.
D) The retail inventory method estimates ending inventory cost using purchase prices and an average gross margin.