Use for 5-6 On August 31, a hurricane destroyed a retail location of Chelsea Sto

Question

Use for 5-6 On August 31, a hurricane destroyed a retail location of Chelsea Stores including the entire inventory on hand at the location. The inventory on hand as of June 30 totaled $480,000. Since June 30 until the time of the hurricane, the company made purchases of $250,000 and had sales of $575,000. 5. If sales are made at 40% above cost, what is the approximate value of the inventory that was destroyed? 6. Compute the cost of goods destroyed, assuming that the gross profit is 40% of sales.

Explanation / Answer

Answer:- Calculation of closing inventory:-

     = Opening inventory + Purchases + Gross margin on sales – Sales value

    = $480000+$250000+$230000- $575000

    = $385000

Where:-

Gross margin = Sales * Gross profit ratio = $575000*40% = $230000

Hence approximate value of inventory that was destroyed $385000.

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.