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2 April, 05:53

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 $ 49,000 $ 66,000

Net purchases 157,000 221,000

Net markups 25,000

Net markdowns 38,000

Net sales 223,000

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

a. 83.1%

b. 66.0%

c. 71.8%

d. 75.2%

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Answers (1)
  1. 2 April, 07:19
    0
    Option (b) is correct.

    Explanation:

    Given that,

    Under cost:

    Beginning inventory = $49,000

    Net purchases = 157,000

    Total value:

    = Beginning inventory + Net purchases

    = $49,000 + 157,000

    = $206,000

    Under Retail:

    Beginning inventory = $66,000

    Net purchases = 221,000

    Net markups = 25,000

    Net markdowns = 38,000

    Net sales = 223,000

    Total value:

    = Beginning inventory + Net purchases + Net markups

    = $66,000 + $221,000 + $25,000

    = $312,000

    Cost to retail percentage:

    = (Total value under cost : Total value under retail) * 100

    = ($206,000 : $312,000) * 100

    = 0.66 * 100

    = 66%
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