Question

Presented below is information related to Culver Company. Cost Retail Beginning inventory $ 62,430 $90,900 Purchases (net) 113,840 183,000 Net markups 9,421 Net markdowns 26,181 Sales revenue 182,600 x Your answer is incorrect. Compute the ending inventory at retail. Ending inventory $ 214810

Answer 1

Solution : Computation of ending inventory at retail :

(Amount in $ ) Cost. Retail

Beginning Inventory. 62,430. 90,900

Add:

Purchases.    1,13,480. 1,83,000

Net markups. 9,421

______________ _____________

Cost of goods available for. 1,75,910. 2,83,321

Sale

Less : Sales 1,82,600

Markdowns 26,181

      ______________

Ending inventory at retail       74,540

Computation of cost to retail (%) :

1). Excluding markups and markdowns :

Cost of goods available for sale under cost price / Cost of goods available for sale under retail price (excluding markups)

= $ 1,75,910 / $ 2,73,900 = .6422 or 64.22 %

2). Excluding markups and including markdowns :

Cost to retail ratio = 64.22 %

3). Excluding markdowns and including markups :

Cost of goods available for sale under cost price / Cost of goods available for sale under retail price

= $ 1,75,910 / $ 2,83,321 = .6209 or 62.09 %

4). Including markups and markdowns :

Cost to retail ratio = 62.09%

Which of the method in (b) above does the following :

Ans : Excluding markdowns but including markups

Valuation of ending inventory at cost or market price whichever is lower :

Ending inventory at market price = $ 74,540

Ending inventory at cost = Ending inventory at retail price X cost to retail ratio

Ending inventory at cost = $74,540 X 62.09% = $ 46282

Ending inventory at lower of cost or market price = $ 46,282

Cost of goods sold based on (d) :

$ 2,83,321