A Company Uses the Basic Retail Method to Estimate the Cost

question 32

Multiple Choice

A company uses the basic retail method to estimate the cost of ending inventory for interim financial statements. Which of the following responses describe the correct treatment of markups and markdowns in the calculation of the cost-to-retail ratio?

• A) \[\begin{array} { | c | c | }
• \hline \text { Markups } & \text { Markdowns } \\
• \hline \text { add } & \text { subtract } \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | c | }
• \hline \text { Markups } & \text { Markdowns } \\
• \hline \text { add } & \text { exclude } \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | c | }
• \hline \text { Markups } & \text { Markdowns } \\
• \hline \text { subtract } & \text { add } \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | c | c | }
• \hline \text { Markups } & \text { Markdowns } \\
• \hline \text { exclude } & \text { exclude } \\
• \hline
• \end{array}\]

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Definitions:

Externally Administered

Managed or controlled by an outside entity or organization, rather than by the internal staff or resources of the primary organization.

Supervisor

An individual in charge of overseeing and guiding the work of a team or department to ensure productivity and adherence to standards.

Two-Factor Theory

Two-Factor Theory is a psychological theory that posits employee motivation and job satisfaction are influenced by two distinct factors: hygiene factors and motivators.

Job Satisfaction

The level of contentment workers feel regarding their jobs, encompassing aspects like work environment, pay, and respect.