Fuque Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of October 2021.

Inventory, October 1, 2021
At cost...........................................................................$ 52,000
At retail............................................................................78,000
Purchases (exclusive of freight and returns)
At cost...........................................................................272,000
At retail.........................................................................423,000
Freight-in........................................................................16,600
Purchase returns
At cost...............................................................................5,600
At retail..............................................................................8,000
Markups............................................................................9,000
Markup cancellations......................................................2,000
Markdowns (net)..............................................................3,600
Normal spoilage and breakage....................................10,000
Sales revenue...............................................................390,000

Instructions

a. Using the conventional retail method, prepare a schedule computing estimated lower-of-cost-or market inventory for October 31, 2021.

b. A department store using the conventional retail inventory method estimates the cost of its ending inventory as $60,000. An accurate physical count reveals only $47,000 of inventory at lower-of-cost-or-market. List the factors that may have caused the difference between the computed inventory and the physical count.