The retail method is often used in the retail industry for measuring inventories of large
numbers of rapidly changing items, that have similar margins and for which it is
impracticable to use other costing methods. The cost of the inventory is determined by
reducing the sales value of the inventory by the appropriate percentage gross margin.
The percentage used takes into consideration inventory which has been marked down to below its original selling price. An average percentage for each retail department is
often used.