Homework Answers
Required 1.
| Cost | Retail | |
| Beginning inventory August 1 | $ 71000 | $ 106000 |
| Purchases | $ 93910 | $ 133000 |
| Total merchandise available for sale | $ 164910 | $ 239000 |
| less: Sales | $ 80730 | $ 117000 |
| Ending Inventory | $ 84180 | $ 122000 |
Cost to retail ratio=
(Cost of the beginning inventory + cost of the inventory purchased)/ (Retail value of the beginning inventory +Retail value of inventory Purchased)
= (71000+93910) / ( 106000+ 133000) = .69
therefore cost of the sold merchandise during August = $ 117000 * .69 = $ 80730
cost of the ending inventory = $ 164910 - $ 80730 = $ 84180
Required 1. : Retail value of the ending inventory as of august 31 = inventory available for sale - sales
= $ 239000 - $ 117000 = $ 122000
Required 2 : Approximate cost of the ending inventory = $ 84180, we can find it in another way ; we already found cost to retail ratio that is .69 retail value of ending inventory = $ 122000.
therefore cost of ending inventory = cost to retail ratio * retail value = .69* 122000 = $ 84180
Required 3 : Cost of goods sold during August = $ 80730
that is , retail value of sales * cost to retail ratio = $ 117000 * .69 = $ 80730
Analyse : Estimated amount of gross profit
=( Sales + Closing stock )- (opening stock + purchases) = (117000 + 84180) - ( 71000 + 93910) = $ 36270
simply it can be find by, sales - cost of goods sold = 117000- 80730 = $ 36270
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