Oriole Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $42,560. Purchases since January 1 were $80,640; freight-in, $3,808; purchase returns and allowances, $2,688. Sales are made at 33 1/3% above cost and totaled $129,000 to March 9. Goods costing $12,208 were left undamaged by the fire; remaining goods were destroyed. Collapse question part (a) Compute the cost of goods destroyed. (Round gross profit percentage and final answer to 0 decimal places, e. g. 15% or 125.) Cost of goods destroyed $

Question

Maxim

Business

1 May, 09:56

Oriole Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $42,560. Purchases since January 1 were $80,640; freight-in, $3,808; purchase returns and allowances, $2,688. Sales are made at 33 1/3% above cost and totaled $129,000 to March 9. Goods costing $12,208 were left undamaged by the fire; remaining goods were destroyed. Collapse question part (a) Compute the cost of goods destroyed. (Round gross profit percentage and final answer to 0 decimal places, e. g. 15% or 125.) Cost of goods destroyed $

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Answers (1)

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Patrick Hawkins · Answer 1

the cost of goods destroyed is $15,362

Explanation:

Note Sales are made at 33 1/3% above cost. Thus the Mark - up is 1/3.

Using the Mark-up and Margin Relationship:

Gross Profit Margin = 1 / (3+1)

=1/4

Therefore gross profit = $129,000 * 25%

= $32,250

Income Statement Using the Gross Profit Margin

Sales $129,000

Less Cost of Goods Sold

Opening Stock $42,560

Add Purchases $80,640

Add Freight In $3,808

Less Returns ($2,688) $81,760

Available for Sale $124,320

Less Closing Stock ($12,208)

$112,112

Less Goods destroyed ($15,362) (96,750)

Gross Profit $32,250