A Company Uses the Retail Inventory Method and Has the Following

question 223

Essay

A company uses the retail inventory method and has the following information available concerning its most recent accounting period:
$$\begin{array} { | l | l | r |} \hline& \text { At Cost } & \text { At Retrail } \\ \hline \text { January I beginging inventory } & \$ 167,340 & \$ 304,240 \\\hline\text { Cost of goods purchased } & 561,850 & 1,021,560 \\\hline \text { Sales } & & 940,400 \\\hline\text { Sales returns }&&40,200\\\hline\end{array}$$
1. Use the retail inventory method to estimate the company's year-end inventory at cost.
2. A year-end physical count at retail prices yields a total inventory of $404,800. Prepare a calculation showing the company's loss from shrinkage at cost and at retail.

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Definitions:

Total Variable Cost

The total of all costs that vary with the level of output, including materials, labor, and other expenses that increase as production increases.

Total Cost

The sum of fixed cost and variable cost.

ATC

Average Total Cost, which is the total cost of production divided by the quantity of output produced, encompassing both fixed and variable costs.

Plant Size

The physical capacity or output potential of a manufacturing or production facility.