A Company Uses the Basic Retail Method to Estimate the Cost

A company uses the basic retail method to estimate the cost of ending inventory for interim financial statements. Which of the following responses describe the correct treatment of markups and markup cancellations in the calculation of the cost-to-retail ratio?

A) $$\begin{array} { | c | c | } \hline \text { Markups } & \text { Markup Cancellations } \\\hline \text { add } & \text { subtract } \\\hline\end{array}$$
B) $$\begin{array} { | c | c | } \hline \text { Markups } & \text { Markup Cancellations } \\\hline \text { add } & \text { exclude } \\\hline\end{array}$$
C) $$\begin{array} { | c | c | } \hline \text { Markups } & \text { Markup Cancellations } \\\hline \text { add } & \text { add } \\\hline\end{array}$$
D) $$\begin{array} { | c | c | } \hline \text { Markups } & \text { Markup Cancellations } \\\hline \text { subtract } & \text { exclude } \\\hline\end{array}$$