Question

Data below for the year ended December 31, 2018, relates to Houdini Inc. Houdini started business January 1, 2018, and uses the LIFO retail method to estimate ending inventory. Cost Retail Beginning inventory $ 66,000 $ 104,000 Net purchases 280,000 420,000 Net markups 20,000 Net markdowns 40,000 Net sales 375,000 Current period cost-to-retail percentage is:

Answer 1

Answer: 63.6%

Explanation:

Given that,

Cost:

Beginning inventory = $ 66,000

Net purchases = $280,000

Total of cost = Beginning inventory + Net purchases

                    = $66,000 + $280,000

                    = $346,000

Retail:

Beginning inventory = $104,000

Net purchases = $420,000

Net markups = $20,000

Total of Retail = Beginning inventory + Net purchases + Net markups

                       = $104,000 + $420,000 + $20,000

                       = $544,000

Cost to retail percentage = $\frac{Total\ of\ cost}{Total\ of\ Retail}\times100$

                                          = $\frac{346,000}{544,000}\times100$

                                          = 63.6%