Compute the Cost of Ending Inventory Using the Retail Method

question 52

Multiple Choice

Compute the cost of ending inventory using the retail method when goods available for sale at cost are $10,000, retail is $27,000, and sales at retail equal $23,000. What will the cost ratio be? What will the cost of ending inventory be?

• A) Cost ratio 37%; ending inventory $4,000
• B) Cost ratio 43%; ending inventory $17,000
• C) Cost ratio 85%; ending inventory $8,520
• D) Cost ratio 37%; ending inventory $1,480

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Definitions:

Good Faith

An honest intention to act without taking an unfair advantage over another party.

High Process Control

A situation where there is strict regulation and management of the procedures and methods utilized in production or in carrying out tasks.

Third-party Conflict

A type of conflict resolution involving an outside party who intervenes to help the conflicting parties reach a resolution.

Arbitration

A form of alternative dispute resolution where a neutral third party makes a binding decision to resolve a dispute between two or more entities.