Estimate the cost of ending inventory based on the retail method using the following information:

Cost Retail
Beginning Inventory $ 600,000 $ 800,000
Purchases $ 450,000 $ 600,000
Net Sales $1,000,000

A. $150,000

B. $262,500

C. $300,000

D. $750,000

To estimate the cost of ending inventory based on the retail method, we need to calculate the cost-to-retail ratio (also known as the cost ratio).

Step 1: Calculate the cost ratio:

Beginning Inventory at Cost / Beginning Inventory at Retail = $600,000 / $800,000 = 0.75

Step 2: Calculate the total cost of purchases:

Total Purchases at Cost = $450,000

Step 3: Calculate the total goods available for sale at retail:

Total Goods Available for Sale at Retail = Beginning Inventory at Retail + Total Purchases at Retail
= $800,000 + $600,000
= $1,400,000

Step 4: Calculate the total sales at retail:

Total Sales at Retail = Net Sales
= $1,000,000

Step 5: Calculate the estimated ending inventory at retail:

Ending Inventory at Retail = Total Goods Available for Sale at Retail - Total Sales at Retail
= $1,400,000 - $1,000,000
= $400,000

Step 6: Calculate the estimated ending inventory at cost:

Ending Inventory at Cost = Ending Inventory at Retail × Cost Ratio
= $400,000 × 0.75
= $300,000

Therefore, the estimated cost of ending inventory based on the retail method is $300,000. The correct answer is C. $300,000.

To estimate the cost of ending inventory based on the retail method, we need to use the formula:

Ending Inventory at Cost = (Ending Inventory at Retail) - (Markdowns) + (Markup)

To calculate the ending inventory at retail, we need to add the beginning inventory at retail with the purchases at retail, and then subtract the net sales:

Ending Inventory at Retail = Beginning Inventory at Retail + Purchases at Retail - Net Sales

Given the information provided:

Beginning Inventory at Retail = $800,000
Purchases at Retail = $600,000
Net Sales = $1,000,000

Now we can calculate the ending inventory at retail:

Ending Inventory at Retail = $800,000 + $600,000 - $1,000,000 = $400,000

Next, we need to determine the markdowns. Markdowns represent the reduction in prices that occur during the sales period. In this case, the information does not provide any details about markdowns, so we assume there are no markdowns.

Since there are no markdowns, the formula becomes:

Ending Inventory at Cost = Ending Inventory at Retail

Therefore, the estimated cost of ending inventory based on the retail method is $400,000.

Therefore, the correct answer is C. $300,000.