Asked by Shelby Bliss on Jun 06, 2024
Verified
A business uses the retail inventory method to estimate the value of the ending inventory. For the month of June, the cost of goods available for sale is $15,900 at cost and $22,100 at retail. The cost ratio is:
A) 71.9%.
B) 28.05%.
C) 39%.
D) None of these is correct.
Retail Inventory Method
An accounting technique for estimating inventory value by using a proportion between the retail price and cost of goods.
Cost Ratio
A measure that compares a company's operating expenses to its revenue, indicating how efficiently it is managed by showing the percentage of sales that goes towards covering costs.
- Scrutinize the retail methodology in estimating the termination inventory.
Verified Answer
JR
Jessica RiveraJun 08, 2024
Final Answer :
A
Explanation :
The cost ratio is calculated by dividing the cost of goods available for sale by the retail price of goods available for sale. So, $15,900 / $22,100 = 0.719 or 71.9%.
Learning Objectives
- Scrutinize the retail methodology in estimating the termination inventory.