Bright Garden Center had the following data for May: $\begin{array} { | l | r | r | }
\hline & \text { Cost Price } & \text { Retail Price } \
\hline \text { Beginning inventory } & \$ 1,000 & \$ 1,600 \
\hline \text { Purchases } & 2,500 & 4,650 \
\hline \text { Sales } & & 4,850 \
\hline
\end{array}$ The cost of the estimated inventory on May 31 under the retail method is:

Question

Bright Garden Center had the following data for May: $\begin{array} { | l | r | r | } 
\hline & \text { Cost Price } & \text { Retail Price } \
\hline \text { Beginning inventory } & \$ 1,000 & \$ 1,600 \
\hline \text { Purchases } & 2,500 & 4,650 \
\hline \text { Sales } & & 4,850 \
\hline
\end{array}$ The cost of the estimated inventory on May 31 under the retail method is:

Quizplus · Accepted Answer

The retail method estimates ending inventory at cost by using a cost-to-retail price ratio. First, calculate the cost-to-retail price ratio: $\frac{\text{Total Cost Price}}{\text{Total Retail Price}} = \frac{1,000 + 2,500}{1,600 + 4,650} = \frac{3,500}{6,250} = 0.56$. Then, subtract sales from the total retail price to find the ending inventory at retail price: $6,250 - 4,850 = 1,400$. Finally, apply the cost-to-retail price ratio to estimate the ending inventory at cost: $1,400 \times 0.56 = 784$.

Bright Garden Center Had the Following Data for May The Cost of the Estimated Inventory on May 31 Under