The following data is from Netflicks Company for 2020. Sales revenue $96,000
Beginning inventory 12,800
Purchases 64,000
For each separate case a through e, estimate ending inventory.
a. Markup is 50% on cost. ?
b. Markup is 60% on sales. ?
c. Markup is 25% on cost. ?
d. Markup is 40% on sales. ?
e. Markup is 60% on cost. ?

a. $12,800

b. $38,400

c. $0

d. $19,200

e. $16,800

Explanation:

Given the following;

Sales revenue $96,000

Beginning inventory $12,800

Purchases $64,000

Recall that

Opening inventory + purchases - sales = closing inventory

Also;

a. If Markup is 50% on cost, let the cost of the items sold be T then

50% * T + T = 96,000

1.5T = 96,000

Divide both side by 1.5

T = $64,000

Hence the closing inventory Y may be derived as

Y = 12800 + 64000 - 64000

Y = $12,800

b. If Markup is 60% on sale, let the cost of the items sold be T then

T = $96,000 - (60% * $96,000)

= $96000 - $57600

= $38400

Ending inventory Y = 12800 + 64000 - 38400

Y = $38,400

c. If Markup is 25% on cost, let the cost of the items sold be T then

25% * T + T = 96,000

1.25T = 96,000

Divide both side by 1.25

T = $76,800

Hence the closing inventory Y may be derived as

Y = 12800 + 64000 - 76800

Y = 0

This means all items were sold.

d. If Markup is 40% on sale, let the cost of the items sold be T then

T = $96,000 - (40% * $96,000)

= $96000 - $38400

= $57600

Ending inventory Y = 12800 + 64000 - 57600

Y = $19,200

e. If Markup is 60% on cost, let the cost of the items sold be T then

60% * T + T = 96,000

1.6T = 96,000

Divide both side by 1.6

T = $60,000

Hence the closing inventory Y may be derived as

Y = 12800 + 64000 - 60,000

Y = $16,800

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