Question

Dicer uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $390,000 ($594,000), purchases during the current year at cost (retail) were $2,055,000 ($3,300,000), freight-in on these purchases totaled $129,000, sales during the current year totaled $3,000,000, and net markups (markdowns) were $72,000 ($108,000). What is the ending inventory value at cost?

a. $556,842.
b. $567,138.
c. $580,206.
d. $858,000.

Answer 1

To determine the ending inventory value at cost, we need to calculate the cost of goods available for sale and subtract the cost of goods sold. The ending inventory value at cost is $567,138.

Step-by-step explanation:

The cost of goods available for sale is the sum of the beginning inventory, purchases, and freight-in. The cost of goods sold is calculated by multiplying the total sales by the cost-to-retail ratio. The ending inventory at cost is then the cost of goods available for sale minus the cost of goods sold.

Using the given information:

• Beginning inventory at cost = $390,000
• Purchases at cost = $2,055,000
• Freight-in on purchases = $129,000
• Sales = $3,000,000
• Net markups (markdowns) = $72,000 ($108,000)

Therefore, the ending inventory value at cost is $567,138.