Garrison Company uses the retail method of inventory costing. It started the year with an inventory that had a retail cost of $45,000. During the year, Garrison purchased an inventory with a retail sales value of $300,000. After performing a physical inventory, Garrison calculated the inventory at retail to be $80,000. The markup is 100% of cost. Determine the ending inventory at its estimated cost.
A) $160,000
B) $80,000
C) $40,000
D) $45,000

Question

Garrison Company uses the retail method of inventory costing. It started the year with an inventory that had a retail cost of $45,000. During the year, Garrison purchased an inventory with a retail sales value of $300,000. After performing a physical inventory, Garrison calculated the inventory at retail to be $80,000. The markup is 100% of cost. Determine the ending inventory at its estimated cost.​
A) $160,000
B) $80,000
C) $40,000
D) $45,000

Quizplus · Accepted Answer

The ending inventory at its estimated cost is calculated by dividing the ending inventory at retail ($80,000) by the markup (100% of cost means the retail price is double the cost, so the cost is 50% of the retail price). Therefore, $80,000 * 50% = $40,000.

Garrison Company Uses the Retail Method of Inventory Costing