Question

Devin Corp operates both a retail and wholesale division selling a line of submersible pumps. Both operations have significant inventory.

For the retail division, Devin uses the retail weighted average inventory method and makes sure to apply it in a way that approximates the lower cost or market. In 2015, Devin had the following results in the retail division:

Purchases at invoice cost   $680,000 and at the suggested retail value of $1,296,000

Purchase returns were $11,000 at cost and at the suggested retail value of $20,900

Freight in on purchases $16,400.

Beginning inventory at retail is $107,500, and the inventory reported on the 2014 balance sheet was 54,600.

Mark ups were $4,000, and markdowns were $46,000.

Net sales for the year were $1,284,000.

Required for the retail division:

1. Calculate the ending inventory that should be reported at the end of the 2015 balance sheet.
2. Calculate COGS for 2015.
3. Calculate gross margin ratio for 2015

Answer 1