Final answer:
The cost-to-retail ratio under the conventional retail inventory method includes beginning inventory and purchases at retail price but excludes net sales and ending inventory at retail price. It is calculated by dividing the total cost of goods available by the total goods available at retail price.
Step-by-step explanation:
The calculation of the cost-to-retail ratio under the conventional retail inventory method includes beginning inventory at retail price, purchases at retail price, and cost of goods available for sale at retail. However, it does not include net sales or ending inventory at retail price. To calculate the cost-to-retail ratio, you first add the beginning inventory at retail price to the purchases at retail price to obtain the goods available for sale at retail price. You then determine the cost of this goods available by adding the beginning inventory at cost and the purchases at cost. Finally, you divide the total cost of goods available by the total goods available at retail price.
Here's the formula for the cost-to-retail ratio calculation:
- Cost of Goods Available for Sale at Cost / Goods Available for Sale at Retail Price = Cost-to-Retail Ratio