Question

Willie Nelson's Boots uses the conventional retail method to estimate ending inventory. Cost data for the...

Willie Nelson's Boots uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below:
   

Cost Retail
Beginning inventory $ 50,000 $ 67,000
Net purchases 158,000 223,000
Net markups 26,000
Net markdowns 39,000
Net sales 224,000

   
The conventional cost-to-retail percentage (rounded) is:

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Answer #1

Answer:

The conventional cost-to-retail percentage (rounded) is: 66%

Calculations:

Cost Retail Cost to retail percentage
Beginning inventory $ 50,000 $ 67,000
Add: Net Purchases $ 158,000 $ 223,000
Totals $ 208,000 $ 290,000
Add: Net markups
Markups $ 26,000
Totals $ 208,000 $ 316,000 66% [$208,000/$316,000]
Markdowns:
(Less): Net Markdowns ($ 39,000)
Goods available for sale $ 277,000
(Less): Net sales ($ 224,000)
Ending inventory at retail $ 53,000
Cost of retail ratio: 66%
Ending inventory at cost $ 34,980
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