RETAIL METHOD Meaning and
Definition
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The retail method is a pricing strategy used by retailers to determine the value of inventory on hand at the end of an accounting period. It relies on calculating the cost of merchandise based on its original retail price, taking into account any discounts or markdowns applied during the selling process.
In essence, the retail method involves multiplying the ending inventory value at retail prices by a cost-to-retail ratio to estimate the cost of goods sold (COGS). This ratio is derived by dividing the total cost of goods available for sale by their total retail value.
By using the retail method, retailers can quickly assess the value of their inventory without having to physically count each item. It provides a relatively accurate estimate of the financial value of inventory on hand, allowing for efficient decision-making when it comes to pricing strategies, purchases, and other inventory management processes.
However, it is important to note that the retail method assumes a constant relationship between cost and retail price. Therefore, if there have been significant price fluctuations or if some items have been heavily discounted during the period, the estimated COGS may not be entirely accurate.
In summary, the retail method is a valuation technique used in retail to estimate the cost of goods sold by considering the original retail price of inventory and applying a cost-to-retail ratio. It offers a convenient way to assess inventory value while making inventory management decisions.
Common Misspellings for RETAIL METHOD
- eetail method
- detail method
- fetail method
- tetail method
- 5etail method
- 4etail method
- rwtail method
- rstail method
- rdtail method
- rrtail method
- r4tail method
- r3tail method
- rerail method
- refail method
- regail method
- reyail method
- re6ail method
- re5ail method
- retzil method
- retsil method
Etymology of RETAIL METHOD
The word "retail" is derived from the Old French word "retailler", meaning "to divide or cut again". In the 14th century, it began to be used more specifically in English to refer to the act of selling goods in small quantities to end consumers.
The term "method" comes from the Latin word "methodus", which comes from the Greek word "methodos", meaning "pursuit" or "way of arriving". It refers to a systematic order or procedure for doing something.
When combined, the term "retail method" refers to the systematic approach or procedure used in retail sales, specifically in terms of inventory valuation. It is a method used to estimate the cost of ending inventory by analyzing the cost and quantity of goods sold during a period.
