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when using the retail inventory method to calculate a company's cost ratio, can the result be...

when using the retail inventory method to calculate a company's cost ratio, can the result be greater than 100 percent.? Explain in detail

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Answer #1

The retail inventory method compares the cost of beginning inventory and cost of purchases (including freight etc) with the retail price of beginning inventory and retail price of goods purchased during the year.

Cast Ratio = cost of beginning inventory + cost of inventory purchased including incidental costs such as freight-in
retail value of beginning inventory + retail value of goods purchased during the period

This can be greater than 100% in case the cost of goods available for sale is more than the sales values.

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