Why are markdowns excluded from the cost-to-retail ratio in the lower-of-cost-or-market method? Markdowns are considered markup cancellations under the lower-of-cost-or-market method. Markdowns are offset by markups and do not need to be included in the lower-of-cost-or-market method. Markdowns are considered a current loss under the lower-of-cost-or-market method. Markdowns do not affect the invoice price and should be excluded from the cost percentage in all methods