10 The following data are obtained from DK Stores Inc.’s financial records: 2021 Cost Retail Beginning...

10

The following data are obtained from DK Stores Inc.’s financial records:

	2021
	Cost	Retail
Beginning Inventory	$75,600	$126,000
Purchases	176,000	244,000
Purchases discount	1,130
Net markups		9,500
Net markdowns		10,625
Normal spoilage		1,200
Sales to customers		215,000
Sales to employees (after 40% employee discounts)		9,705
Price index	1.05

Price indices are based on January 1, 2021 which is the base year.

Suppose DK uses the average cost retail inventory method to account for its inventory. What is the current period cost-to-retail % (rounded to the nearest 0.1%)?

Expert Solution

DK Stores Inc.,
	Cost	Retail
Beginning Inventory	$75,600	$126,000
Purchases	$176,000	$244,000
Purchases discount	($1,130)
Net Markups		$9,500
Net Markdowns		($10,625)
Total	$250,470	$368,875

*Cost to Retail % = (Cost/Retail Price) 100**
Cost	$250,470
Retail	$368,875
Cost/Retail %	67.90%

Computation of Ending Inventory at Retail
Total Retail Value		$368,875
Normal spoilage		($1,200)
Sales to Customers		($215,000)
Sales to Employees		($16,175)
Ending Inventory at retail		$136,500

Ending Inventory at retail at current price		$136,500
Price index		1.05
Ending Inventory at retail at base price		$130,000

Computation of Ending Inventory at Cost
Ending Inventory at retail at base price		$130,000
Cost/Retail %		67.90%
Ending Inventory at cost		$88,270

ekkarill92 answered 2 years ago

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