Exercise 9-20 Presented below is information related to Sweet Company Cost Retai

Question

Exercise 9-20 Presented below is information related to Sweet Company Cost Retail Beginning inventory Purchases (net) Net markups Net markdowns Sales revenue 54,010 $107,900 193,500 10,281 26,700 174,520 129,230 Compute the ending inventory at retail Ending inventorys LINK TO TEXT Compute a cost-to-retail percentage under the following conditions. (Round ratios to 2 decimal places, eg, 78.74%) Cost-to-retail percentage (1) Excluding both markups and markdowns (2) Excluding markups but including markdowns (3) Excluding markdowns but including markups (4) Including both markdowns and markups LINK TO TEXT Which of the methods in (b) above does the following? (1) Provides the most conservative estimate of ending inventory (2) Provides an approximation of lower-of-cost-or-market. (3) Is used in the conventional retail method

Explanation / Answer

1)Ending Inventory at retail : Beginning inventory+purchase+markup -markdown -sales

          = 107900+193500+10281-26700-174520

          = 110461

2)

3)

4)Ending inventory at cost :Ending inventory at retail * cost to retail ratio( in part 2(C)

               = 110461 * 58.79 %

       = $64940

5)

cost of goods sold: 183240-64940 = 118300

6)

Gross margin : sales revenue - cost of goods sold

              = 174520 -118300

             = $ 56220

Cost Retail Cost toRetail % a 5400+129230=183240 107900+193500=301400 183240/301400=.6080 or 60.80% b 183240 107900+193500-26700=274700 183240/274700=66.71% c 183240 107900+193500+10281= 311681 183240/311681=58.79% d 183240 107900+193500+10281-26700=284981 183240/284981=64.30%

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