Huddell Company, which is both a wholesaler and retailer, purchases merchandise from various suppliers. The

dollar-value LIFO method is used for the wholesale inventories.

Huddell determines the estimated cost of its retail ending inventories using the conventional retail inventory

method, which approximates lower of average cost or market.

Required:

1. a. What are the advantages of using the dollar-value LIFO method as opposed to the traditional LIFO

method?

b. How does the application of the dollar-value LIFO method differ from the application of the traditional

LIFO method?

2. a. In the calculation of the cost-to-retail percentage used to determine the estimated cost of its ending inventories,

how should Huddell use

Net markups?

Net markdowns?

b. Why does Huddell's retail inventory method approximate lower of average cost or market?