If the net markdowns are excluded from the calculation of the cost-to-retail ratio in the retail inventory method, the ending inventory's valuation is lower because of which of the following effects on the cost-to-retail ratio?

Question

Quizplus · Accepted Answer

Excluding net markdowns from the cost-to-retail ratio calculation will result in a higher denominator, as the retail value remains the same but the cost value is reduced. This will result in a lower cost-to-retail ratio, which leads to a lower ending inventory valuation.

If the Net Markdowns Are Excluded from the Calculation of the Cost-To-Retail