Gross profit rate : It is a measure of the profitability of a company. Higher the value of the gross profit rate, better the profitability, a company has. It can be calculated as shown below. G r o s s p r o f i t r a t e = S a l e s − cos t o f g o o d s s o l d S a l e s × 100 % Gross profit method: Gross profit method is a technique, used to estimate the ending inventory. In this method, gross margin ratio or gross profit rate is used to estimate the ending inventory. Here, the cost of goods sold is considered as sales multiplied by one minus gross profit rate (=1-gross profit rate). Then this cost of goods sold is deducted from the total inventory, available for sale in order to estimate the ending inventory. To estimate: The cost of inventory destroyed

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Chapter 6, Problem 22BQS

To determine

Gross profit rate:

It is a measure of the profitability of a company. Higher the value of the gross profit rate, better the profitability, a company has. It can be calculated as shown below.

Gross profit rate=Sales−cost of goods soldSales×100%

Gross profit method:

Gross profit method is a technique, used to estimate the ending inventory. In this method, gross margin ratio or gross profit rate is used to estimate the ending inventory. Here, the cost of goods sold is considered as sales multiplied by one minus gross profit rate (=1-gross profit rate). Then this cost of goods sold is deducted from the total inventory, available for sale in order to estimate the ending inventory.

To estimate:

The cost of inventory destroyed

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