A Company Uses the Basic Retail Method to Estimate the Cost

Multiple Choice

A company uses the basic retail method to estimate the cost of ending inventory for interim financial statements. Which of the following responses describe the correct treatment of markups and markdowns in the calculation of the cost-to-retail ratio?

A) $$\begin{array} { | c | c | } \hline \text { Markups } & \text { Markdowns } \\\hline \text { add } & \text { subtract } \\\hline\end{array}$$
B) $$\begin{array} { | c | c | } \hline \text { Markups } & \text { Markdowns } \\\hline \text { add } & \text { exclude } \\\hline\end{array}$$
C) $$\begin{array} { | c | c | } \hline \text { Markups } & \text { Markdowns } \\\hline \text { subtract } & \text { add } \\\hline\end{array}$$
D) $$\begin{array} { | c | c | } \hline \text { Markups } & \text { Markdowns } \\\hline \text { exclude } & \text { exclude } \\\hline\end{array}$$