Posted: July 23rd, 2016

Which of the following variations of the retail inventory method would generally result in the lowest cost to retail ratio in a period of rising prices?

At the beginning of 2010, the Nancy Company had an inventory valued at $34,375 at cost ($50,000 at retail). During the year, Nancy purchased inventory for $50,000 ($70,000 at retail), and made markdowns of $7,500. Nancy s sales in 2010 were $62,500. What is Nancy s estimated ending inventory at FIFO cost using the retail inventory method?
$37,500
$40,000
$39,000
$34,375

With the retail inventory method, how is the total beginning inventory value used in the calculation of the cost to retail ratio for the current period under the following cost flow assumptions?

Include Include Exclude
Include Exclude Exclude
Exclude Exclude Exclude
Exclude Include Exclude

If the net markdowns are excluded from the calculation of the cost to retail ratio in the retail inventory method, the ending inventory s valuation is lower because of which of the following effects on the cost to retail ratio?
The denominator of the ratio will be lower, which results in a higher cost to retail ratio.
The denominator of the ratio will be higher, which results in a lower cost to retail ratio.
The numerator of the ratio will be higher, which results in a higher cost to retail ratio.
The numerator of the ratio will be lower, which results in a lower cost to retail ratio.

FIFO
LIFO
average cost
lower of average cost or market

Which of the following items would not be used in the calculation of the cost to retail ratio if the FIFO retail inventory method were used to determine the ending inventory?