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    titans2008's Avatar
    titans2008 Posts: 10, Reputation: 1
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    #1

    May 25, 2008, 01:32 PM
    Retail Inventory method
    I need help with retail inventory method: I do not know how to figure out goods available for sale at retail, or any other bits of information... Here is the question/equation

    Athletic Shirts: (selling price 1.6 times the cost)
    beginning inventory at cost: 48000
    sales for the 1st 6 months 249600
    purchases at cost 144000

    Athletic coats ( selling price is double their cost)
    beginning inventory at cost: 35000
    sales for the 1st 6 months 207000
    purchases at cost 92500

    Help is appreciated!
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #2

    May 25, 2008, 06:58 PM
    First, you need to know this "formula":

    Beginning inventory
    +Purchases
    =Available for Sale
    -COGS
    =Ending Inventory (estimated in this case)

    Keep in mind that this inventory at cost also has a retail price. Like COGS and Sales are actually the same inventory, one at cost and one at retail. So this "formula" works whether using cost or retail.

    And how you get the retail value is to multiply by the 1.6.

    Easiest way is setting up two columns with all numbers side-by-side, one column for cost and one column for sales. Then you are finding the missing numbers using the above info.

    Give it a try. You're welcome to post your answers, or any part of an answer, and someone can check it.
    titans2008's Avatar
    titans2008 Posts: 10, Reputation: 1
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    #3

    May 26, 2008, 08:54 AM
    Does that mean everything is multiplied by 1.6 in order to get the retail cost for say, beginning inventory, net sales, etc?
    titans2008's Avatar
    titans2008 Posts: 10, Reputation: 1
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    #4

    May 26, 2008, 09:11 AM
    Attached is what I have so far. Please let me know if I am on the right track ,and what is needed from this point on?
    Attached Files
  1. File Type: xls so far.xls (13.5 KB, 215 views)
  2. morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #5

    May 26, 2008, 02:55 PM
    Actually, I just made this more difficult than it needed to be. I was going by how the usual problem presents the info and wasn't thinking about the fact that they already gave you the 1.6. Normally they give the retail value of the inventory and purchases, and then make you figure out the 1.6. So really, you don't even need to make the 2 columns (although it might help understand the concept.) Sorry 'bout that.

    The problem with what you did is that the 249,600 is already the retail value. That was given as "sales." Sales is going to be retail. Many times retail numbers are given, and you're working back and forth using the proportion of one to the other. Since sales is retail, you need to work backwards to get cost (i.e. divide). That's why you really don't even need that right-hand column for this set-up.
    titans2008's Avatar
    titans2008 Posts: 10, Reputation: 1
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    #6

    May 26, 2008, 07:06 PM
    I have reattached the spreadsheet. I think I'm getting closer. Check it out and let me know, if you don't mind.
    Attached Files
  3. File Type: xls so far.xls (13.5 KB, 193 views)
  4. titans2008's Avatar
    titans2008 Posts: 10, Reputation: 1
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    #7

    May 27, 2008, 09:25 AM
    I believe I am now finished... Can someone please check this for me?
    Attached Files
  5. File Type: xls retail assignment.xls (14.5 KB, 203 views)
  6. morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #8

    May 27, 2008, 08:57 PM
    It ended up being easier to write on your spreadsheet. It was difficult to make reference to certain areas here, so I colored-coded some stuff and then made comments out to the side in reference to the colored area. At the bottom I set it up how I do them.
    Attached Files
  7. File Type: xls retail assignment.xls (18.5 KB, 205 views)

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