[monaliz_20]

I've been answering exercises in my book and I encountered this confusing problem. Hopefully, someone can clear this out for me.

Hooked on Books uses the retail inventory method to estimate its monthly ending inventories. The following information is available for two of its departments at October 31, 2005

Hardcovers
Cost Retail
Beginning Inventory $256,000 $400,000
Purchases 1,180,000 1,825,000
Freight-in 4,000
Net sales 1,820,000

Paperbacks
Cost Retail
Beginning Inventory $ 65,000 $90,000
Purchases 266,000 380,000
Freight in 2,000
Net sales 368,000

At December 31, Hooked on Books takes a physical inventory at retail. The actual retail values of the inventory in each department are Hardcovers $400,000 and Paperbacks $88,000.

Instructions
a) Determine the estimated cost of the ending inventory for each department at October 31, 2005 using the retail inventory method.

My answer in this one is Hardcover $259,200 and Paperback $71,400. Correct me if I'm wrong.

b)Compute the ending inventory at cost for each department at Dec 31, assuming the cost-to-retail ratios for the year are 65% for hardcovers and 70% for paperbacks

Now, I'm stuck in this one. What is the relation of the cost-to-retail ratio with the ending inventory at cost? The thing that I only derived is the cost of goods available for sale at cost which is $1,443,000 for hardcover and $319,200 for paperbacks

THANKS IN ADVANCE