A flood destroyed a company's warehouse contents on September 12. The following information was the only information that was salvaged: Inventory, beginning: $29,900 Purchases for the period: $18,900 Sales for the period: $56,900 Sales returns for the period: $890 The company's average gross profit ratio is 21%. What is the estimated cost of the lost inventory using the gross profit method?

Question

Iliana Villegas

Business

27 April, 18:28

A flood destroyed a company's warehouse contents on September 12. The following information was the only information that was salvaged: Inventory, beginning: $29,900 Purchases for the period: $18,900 Sales for the period: $56,900 Sales returns for the period: $890 The company's average gross profit ratio is 21%. What is the estimated cost of the lost inventory using the gross profit method?

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Alonzo · Answer 1

The estimated cost of lost inventory = $4552.1

Explanation:

The cost of lost inventory = inventory, begining+purchases of the period - ((1-avg gross profit ratio) (sales for the period-returns for the period))

The cost of lost inventory=$29900+$18900 - ((1-0.21) ($56900-$890))

=$48800 - ((0.79) (56010))

=$48800 - (44247.9)

=$4552.1

The estimated cost of lost inventory is $4552.1