Cornhusker Can Co

question 53

Essay

Cornhusker Can Co. uses the conventional retail method to estimate ending inventories. The following data has been summarized for year ended December 31, 2009:
Required:
Estimate the cost of ending inventory applying the conventional retail method. Assume that sales are recorded net of employee discounts.
$$\begin{array} { l c r } & \text { Cost } & \text { Retail } \\\text { Inventory, January 1 } & \$ 80,000 & \$ 126,000 \\\text { Purchases } & 166,000 & 244,000 \\\text { Net markups } & & 9,100 \\\text { Net markdowns } & & 8,200 \\\text { Normal spoilage } & & 13,200 \\\text { Employee discounts } & & 15,600 \\\text { Net sales } & & 238,000\end{array}$$

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Definitions:

Mark-Up Percentage

An added percentage to the buying price of products intended to cover both operational costs and earnings.

Total Variable Cost

The total of all costs that vary directly with the level of output, such as materials and labor costs that increase as more units are produced.

Cost-Plus Pricing

An approach to pricing in which the final selling price is set by adding a predetermined markup to the cost of a single unit of the product.

Variable Manufacturing Cost

Refers to costs that vary directly with the level of production output, including materials, labor, and utility costs.