Retail Inventory Method Calculation
To calculate the cost of ending inventory using the retail inventory method:
Calculate the cost-to-retail percentage, (Cost ÷ Retail price).
Calculate the cost of goods available for sale, (Cost of beginning inventory + Cost of purchases).
Calculate the cost of sales during the period, (Sales × cost-to-retail percentage).
Calculate ending inventory, (Cost of goods available for sale - Cost of sales during the period).
Let's say MRIB sells their vodka for an average of $20 per bottle at a cost of $10. This is a cost-to-retail percentage of 50%. MRIB's beginning inventory has a cost of $100,000 and MRIB made no additional purchases and it had sales of $100,000 The calculation of its ending inventory is:
Beginning inventory $100,000 (At cost)
Purchases + $0 (At cost)
Goods available for sale = $100,000
Sales -$50,000 (Sales of $100,000 x 50%)
Ending inventory =$50,000
Pretty simple. But MRIB shows $75,000 in ending inventory. So sales reported is either bogus or was simply booked and not shipped. This would reflect actual real sales of only $50,000 less COG or $25,000.
Beginning inventory. $100,000 (At cost)
Purchases + $0 (At cost)
Goods available for sale. = $100,000
Sales -$25,000 (Sales of $50,000 x 50%)
Ending inventory =$75,000
This would also jibe with their cash accounting. Given $85,000 in A/R of which $35,000 was built in prior to any sales, true A/R is actually, $50,000. This would represent MRIB has sold/collected virtually nothing and/or has been paid only what actually sells through at retail (that is Costco's method of payment BTW). Looks like MRIB may have shipped some product but it ain't selling and/or was intentionally parked and is uncollectable.
That said I do have to qualify that the numbers were simplified for clear illustration. There is most likely a positive balance on cash of a few thousand dollars as I doubt MRIB hasn't been paid for a single case but it's clearly not much.
This also begs the question of why the June 2014 container was ever needed and what could possibly have represented "increased demand" and need for yet another container to the U.S. (Originally to be shipped to Brazil) in October 2014. Here we are 18 months later and not only has the June container not even been touched but there's still $75,000 in MRIB version 1 inventory left over. Had the Brazil destined shipment actually shipped MRIB would be sitting on $315,000 in inventory at cost. I don't believe the Brazil container ever shipped though and the BOL in January 2015 was dummied up and leaked to the Internet for effect. It might have been paid for though! Good ol Wine Plant. LOL. What is even worse is that inventory at December 2014 was still almost $100,000 indication almost no sales. They only whacked inventory in this last report and for five times more in that one quarter than in the past four quarters combined. If MRIB had sales like that I assure you there would have been a plethora of PRs. Since it was imaginary and could be exposed in the accounting they couldn't for fear of liability.
Bottom line is MRIB sales aren't in line. Inventory purchases make no sense whatsoever. And it certainly looks like MRIB is not selling.
AI
