Patel Packing had the following information for its inventory: Beginning inventory: cost $107,000; retail $130,000 Net purchases: cost $58,000; retail $120,000 Sales at retail: $145,000 What is the estimated cost of the ending inventory?
A) $44,188
B) $57,102
C) $57,750
D) $69,300
E) $105,000

Question

Quizplus · Accepted Answer

1) Calculate the cost-to-retail percentage:
Cost-to-retail percentage = (Beginning inventory cost + Net purchases cost) ÷ (Beginning inventory retail + Net purchases retail)
Cost-to-retail percentage = ($107,000 + $58,000) ÷ ($130,000 + $120,000) = 0.683 (rounded to three decimal places)

2) Calculate the expected ending inventory at retail:
Expected ending inventory at retail = Beginning inventory retail + Net purchases retail - Sales at retail
Expected ending inventory at retail = $130,000 + $120,000 - $145,000 = $105,000

3) Calculate the estimated cost of the ending inventory:
Estimated cost of the ending inventory = Expected ending inventory at retail x Cost-to-retail percentage
Estimated cost of the ending inventory = $105,000 x 0.683 = $71,715 (rounded to the nearest dollar)

Therefore, the best choice is D, $69,300, which is the closest option to the estimated cost of the ending inventory.

Patel Packing Had the Following Information for Its Inventory: Beginning