Answered: cost of the inventory destroyed in the…

Business

Accounting

cost of the inventory destroyed in the fire

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Mark up cost structure example with example of Margin cost structure

Sales 125% Sales 100%
CoS (100%) CoS (75%)
Gross Profit 25%. Gross Profit 25%

On 1st Sept 2021, a business had inventory of $380,000. During the month, sales totalled $650,000 and purchases $480,000. On 30th Sept 2020 a fire destroyed some of the inventory. The undamaged goods in inventory were valued at $220,000. The business operates with a standard gross profit margin of 25%.

a) Based on this information, what is the cost of the inventory destroyed in the fire?

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