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May 24th, 2013, 05:02 PM  #1 
Newbie Joined: May 2013 Posts: 23 Thanks: 0  Cost Retail At Method
Spring Dress shop's inventory at cost on January 1 was $39,000. Its retail is $59,000. During the year, Spring purchased additional merchandise at cost of $195,000 with a retail value of $395,000. The net sales at retail for the year were $348,000. Could you calculate Spring's inventory at cost by the retail method? Round the cost ratio to the nearest whole percent.

May 24th, 2013, 08:15 PM  #2  
Math Team Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 14,597 Thanks: 1038  Re: Cost Retail At Method Quote:
348000  59000 = 289000 applicable to the 195000 (original 39000 is eliminated) 289000/395000 * 195000 = 142.67 = inventory left after year's sale.  
May 25th, 2013, 06:23 AM  #3 
Newbie Joined: May 2013 Posts: 23 Thanks: 0  Re: Cost Retail At Method
I got Inventory at cost $55,120, I found the markup then I based on cost then found the markdown from retail.

May 25th, 2013, 03:47 PM  #4 
Global Moderator Joined: Dec 2006 Posts: 20,969 Thanks: 2219 
The costtoretail ratio for the additional merchandise is very different from that for the inventory at the beginning of the year. Nevertheless, you are expected to simply add the figures given and estimate the costtoretail ratio as (39000 + 195000)/(59000 + 395000) = 52% (after rounding as instructed). Hence the cost price corresponding to the net sales of $348,000 is estimated as 52% of $348,000 = $180,960, and so the inventory at the end of the year is estimated as £39,000 + $195,000  $180,960 = $53,040. 
May 25th, 2013, 05:44 PM  #5 
Math Team Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 14,597 Thanks: 1038  Re: Cost Retail At Method
I see it this way; FIFO: Code: INVENTORY RETAIL Jan.01 39,000 59,000 purchases: 195,000 234,000 395,000 454,000 sales: 39,000 195,000 59,000 395,000 sales: 142,670 52,330 289,000 106,000 EDIT: above not rounded... 
May 26th, 2013, 03:54 AM  #6 
Global Moderator Joined: Dec 2006 Posts: 20,969 Thanks: 2219 
Even if you did it that way, why ignore the instruction to round the cost ratio to the nearest whole percent? 195000/395000 = 49% after rounding, and 49% of $289,000 is $141,610. 
May 26th, 2013, 09:12 PM  #7  
Math Team Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 14,597 Thanks: 1038  Re: Quote:
I'm sure the OP can round off on his own Anyhow, I just added explanation by edit...  

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