Asked by Munei Tshidavhula on May 31, 2024
Verified
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?
A) The denominator of the ratio will be lower, which results in a higher cost-to-retail ratio.
B) The denominator of the ratio will be higher, which results in a lower cost-to-retail ratio.
C) The numerator of the ratio will be higher, which results in a higher cost-to-retail ratio.
D) The numerator of the ratio will be lower, which results in a lower cost-to-retail ratio.
Cost-to-Retail Ratio
A method used in inventory accounting that calculates the cost of goods available for sale as a percentage of the retail price of the goods.
Net Markdowns
Net markdowns represent the reduction in the selling price of goods or products, often reflecting changes in market demand or stock clearance needs, net of any markdown cancellations.
Ending Inventory's Valuation
The process of assigning value to the inventory that is still on hand at the end of an accounting period.
- Analyze the effects of net markups and markdowns on the cost-to-retail ratio and inventory valuation.
Verified Answer
Learning Objectives
- Analyze the effects of net markups and markdowns on the cost-to-retail ratio and inventory valuation.
Related questions
When Calculating the Cost-To-Retail Ratio, Net Markups and Markdowns Are ...
The Beta Company Uses the Retail Inventory Method for Valuation ...
The ________ Is the Dollar Amount Added to the Cost ...
________ Is the Standard Amount Charged to Customers for a ...
All of the Following Are True About Markup EXCEPT That ...