Billingsly Products uses the conventional retail method to estimate its ending inventories. The following data has been summarized for the year 2024:
Cost Retail
Inventory, January 1 $ 61,000 $ 82,000
Purchases 324,280 469,200
Net markups 8,800
Net markdowns 17,500
Net sales 400,000
Required:
Estimate the ending inventory as of December 31, 2024.
Note: Round "Cost-to-retail percentage" to 1 decimal place. Round you answers to the nearest whole dollar amount.
To estimate the ending inventory using the conventional retail method, we need to calculate the cost-to-retail percentage and then apply it to the ending retail value.
We can calculate the cost-to-retail percentage using the following formula:
Cost-to-retail percentage = (Cost of goods available for sale / Retail value of goods available for sale) * 100
First, let's calculate the cost of goods available for sale:
Cost of goods available for sale = Inventory, January 1 + Purchases + Net markups - Net markdowns
Cost of goods available for sale = $61,000 + $324,280 + $8,800 - $17,500
Cost of goods available for sale = $376,580
Next, let's calculate the retail value of goods available for sale:
Retail value of goods available for sale = Retail value, January 1 + Purchases + Net markups - Net markdowns
Retail value of goods available for sale = $82,000 + $469,200 + $8,800 - $17,500
Retail value of goods available for sale = $542,500
Now, let's calculate the cost-to-retail percentage:
Cost-to-retail percentage = ($376,580 / $542,500) * 100
Cost-to-retail percentage = 69.3 (rounded to 1 decimal place)
Finally, let's estimate the ending inventory using the cost-to-retail percentage:
Ending inventory (Cost) = Ending inventory (Retail) * Cost-to-retail percentage
Ending inventory (Cost) = $400,000 * 69.3%
Ending inventory (Cost) = $277,200
Therefore, the estimated ending inventory as of December 31, 2024, is $277,200.