Barbara Co.presents the following information: $\begin{array}{lcc}&\text { Cost }&\text { Retail }\
\text { Net markups } & & \$ 200 \
\text { Sales } & & 2,100 \
\text { Purchases } & \$ 1,870 & 2,050 \
\text { Net markdowns } & & 50 \
\text { Beginning inventory } & 240 & 300
\end{array}$ The company uses the average cost retail inventory method.What is the cost of ending inventory?

Question

Quizplus · Accepted Answer

To find the cost of ending inventory using the average cost retail method, first calculate the cost-to-retail ratio: (Beginning Inventory Cost + Purchases Cost) / (Beginning Inventory Retail + Purchases Retail + Net Markups - Net Markdowns). Then, calculate the ending inventory at retail: (Beginning Inventory Retail + Purchases Retail + Net Markups - Net Markdowns - Sales). Finally, multiply the ending inventory at retail by the cost-to-retail ratio to get the cost of ending inventory.

Barbara Co The Company Uses the Average Cost Retail Inventory Method