Question 20Q
Question
What modifications to the conventional retail method are necessary to approximate a LIFO retail flow?
Step-by-Step Solution
Verified Answer
LIFO retail flow can be estimated, by first excluding the beginning inventory from both numerator and denomination, in the cost to retail percentage. Secondly, markdown should be included in the cost to retail percentage in the denominator.
1Definition of cost to retail percentage
Cost to retail percentage is the ratio of the total cost of the inventory to the total cost of inventory at retail.
2Required modifications
The first modification is required in calculating the cost to retail percentage is excluding the beginning inventory from both inventories at cost and retail. Also, markdown should be added with the inventories at retail price.
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