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Marilee's Electronics uses a periodic inventory system and the average cost retail method to estimate ending inventory and cost of goods sold. The following data is available from the company records for the month of June 2016: Cost Retail
Beginning inventory $ 80,000 $130,000
Net purchases 261,000 500,000
Net markups 25,000
Net markdowns 35,000
Net sales 520,000
The average cost-to-retail percentage is: A. 52.2%.
B. 56.8%.
C. 61.5%.
D. 55%.

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Answer: D. 55%

Explanation:

Cost total = Beginning inventory + net purchase

Cost total = $(80,000 + 261,000) = $341,000

Retail (Goods available for sale) =

(Beginning inventory + net purchases + net markup) - net markdown

$(130,000 + 500,000 + 25,000)-$35,000 = $620,000

Cost-to-retail = cost total ÷ goods available for sale

Cost-to-retail = $341,000 ÷ $620,000

Cost-to-retail = 0.55

Cost-to-retail = 55%

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