Please help thanks :)
I need to know how to figure out this question.
Below is some financial information for the month of September for a large clothing store Using the retail method of inventory, estimate the value of the ending inventory at cost on September 30
Finanical Highlights for Sept 1-Sept 30
Begining inventory cost $575.000 retail $718.750
Net purchases(Sept) cost $60,000
retail $75,00
Net sales(sept)-------------------
Retail $650,000
I have no idea on this one I came up with $12,283
To estimate the value of the ending inventory at cost using the retail method, you need to know the cost ratio. The cost ratio is the cost of the goods divided by the retail price.
To calculate the cost ratio, you can use the formula:
Cost Ratio = Cost / Retail
Let's calculate the cost ratio for the beginning inventory:
Cost Ratio (beginning inventory) = $575,000 / $718,750 = 0.80
Next, you need to calculate the total markup for the net purchases and add it to the beginning inventory at cost:
Total Markup = Net purchases at retail - Net purchases at cost
Net purchases at retail = $75,000
Net purchases at cost = $60,000
Total Markup = $75,000 - $60,000 = $15,000
Ending Inventory at cost = Beginning Inventory at cost + Total Markup
Ending Inventory at cost = $575,000 + $15,000 = $590,000
Therefore, the estimated value of the ending inventory at cost on September 30 is $590,000.
Based on the information provided, the value of $12,283 that you came up with seems to be incorrect.