Sing Along is a popular music store. During the current year, the company’s cost of goods availablefor sale amounted to $330,000. The retail sales value of this merchandise amounted to $600,000.Sales for the year were $520,000.Instructions a. Using the retail method, estimate (1) the cost of goods sold during the year and (2) the inven-tory at the end of the year. b. At year-end, Sing Along takes a physical inventory. The general manager walks through thestore counting each type of product and reading its retail price into a tape recorder. From the recorded information, another employee prepares a schedule listing the entire ending inven-tory at retail sales prices. The schedule prepared for the current year reports ending inventory of $75,000 at retail sales prices. 1. Use the cost ratio computed in part a to reduce the inventory counted by the general man-ager from its retail value to an estimate of its cost. 2. Determine the estimated shrinkage losses (measured at cost) incurred by Sing Along dur-ing the year. 3. Compute Sing Along’s gross profit for the year. (Include inventory shrinkage losses in thecost of goods sold.)c. What controls might Sing Along implement to reduce inventory shrinkage?
Sing Along is a popular music store. During the current year, the company’s cost of goods available
for sale amounted to $330,000. The retail sales value of this merchandise amounted to $600,000.
Sales for the year were $520,000.
Instructions
a. Using the retail method, estimate (1) the cost of goods sold during the year and (2) the inven-
tory at the end of the year.
b. At year-end, Sing Along takes a physical inventory. The general manager walks through the
store counting each type of product and reading its retail price into a tape recorder. From the
recorded information, another employee prepares a schedule listing the entire ending inven-
tory at retail sales prices. The schedule prepared for the current year reports ending inventory
of $75,000 at retail sales prices.
1. Use the cost ratio computed in part a to reduce the inventory counted by the general man-
ager from its retail value to an estimate of its cost.
2. Determine the estimated shrinkage losses (measured at cost) incurred by Sing Along dur-
ing the year.
3. Compute Sing Along’s gross profit for the year. (Include inventory shrinkage losses in the
cost of goods sold.)
c. What controls might Sing Along implement to reduce inventory shrinkage?
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