Dicer uses the conventional retail method to determine its ending inventory at cost.Assume the beginning inventory at cost (retail) were $130,000 ($198,000), purchases during the current year at cost (retail) were $685,000 ($1,100,000), freight-in on these purchases totaled $43,000, sales during the current year totaled $1,050,000, and net markups (markdowns) were $24,000 ($36,000).What is the ending inventory value at cost?

Question

Quizplus · Accepted Answer

The retail method calculates ending inventory at cost by determining the cost-to-retail ratio and applying it to the ending inventory at retail. The cost-to-retail ratio is calculated as (Beginning Inventory Cost + Purchases Cost + Freight-in) / (Beginning Inventory Retail + Purchases Retail + Net Markups - Net Markdowns). The ending inventory at retail is calculated as (Beginning Inventory Retail + Purchases Retail + Net Markups - Net Markdowns - Sales). The ending inventory at cost is then found by multiplying the ending inventory at retail by the cost-to-retail ratio.

Dicer Uses the Conventional Retail Method to Determine Its Ending