Willie Nelson's Boots uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below:

Cost Retail

Beginning inventory $ 49,000 $ 66,000

Net purchases 157,000 221,000

Net markups 25,000

Net markdowns 38,000

Net sales 223,000

The conventional cost-to-retail percentage (rounded) is:

a. 83.1%

b. 66.0%

c. 71.8%

d. 75.2%

Option (b) is correct.

Explanation:

Given that,

Under cost:

Beginning inventory = $49,000

Net purchases = 157,000

Total value:

= Beginning inventory + Net purchases

= $49,000 + 157,000

= $206,000

Under Retail:

Beginning inventory = $66,000

Net purchases = 221,000

Net markups = 25,000

Net markdowns = 38,000

Net sales = 223,000

Total value:

= Beginning inventory + Net purchases + Net markups

= $66,000 + $221,000 + $25,000

= $312,000

Cost to retail percentage:

= (Total value under cost : Total value under retail) * 100

= ($206,000 : $312,000) * 100

= 0.66 * 100

= 66%