A Company Uses the Retail Inventory Method and Has the Following

question 160

Essay

A company uses the retail inventory method and has the following information available concerning its most recent accounting period:
$$\begin{array} { | l | r | r | } \hline & \text { At Cost } & \text { At Retail } \\\hline \text { Beginning-of-period inventory } & \$ 148,600 & \$ 245,200 \\\hline \text { Net purchases } & 677,400 & 1,229,800 \\\hline \text { Sales } & & 1,200,000 \\\hline\end{array}$$ 1. What is the cost-to-retail ratio using the retail method?
2. What is the estimated cost of the ending inventory?

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Definitions:

Variable Costs

Variable costs are expenses that change in proportion to the activity of a business, such as raw material costs, which vary with production volume.

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.

Break-Even Point

The level of production or sales at which total revenues equal total expenses, resulting in no net profit or loss.

Fixed Costs

Static expenses that are independent of production or sales volumes, including costs like rental fees, salary payments, and insurance.