Gross margin percentage in constant gross-margin percentage NRV method is based on

April 15, 2024 by rawan239

(NRV) of inventory. The NRV is calculated by taking the sales price of the inventory and subtracting the estimated costs of disposal. The gross margin percentage is then calculated by dividing the gross margin by the sales price.

The gross margin percentage is used to calculate the NRV of inventory because it is a measure of the profitability of the inventory. The higher the gross margin percentage, the more profitable the inventory is. The NRV of inventory is important because it is used to determine the value of the inventory on the balance sheet.

The other options are incorrect because they are not measures of the profitability of the inventory. Total labor costs, total production, and total costs are all measures of the cost of the inventory. The cost of the inventory is not a good measure of the profitability of the inventory because it does not take into account the sales price of the inventory.