Question

Purchases$111,000 Freight-in 3,100 Sales 185,000 Sales returns 6,000 Purchases returns 4,500 In addition, the controller is aware of $8,500 of inventory that was stolen during November from one of the company's warehouses. Required: 1. Calculate the estimated inventory at the end of November, assuming a gross profit ratio of 40%. 2. Calculate the estimated inventory at the end of November, assuming a markup on cost of 60%.

Answer 1

Answer:

Closing Stock = 38000

Explanation:

Net Sales = COGS + Gross Profit

• Net sales = sales - sales return = 185000 - 6000 = 179000

• Gross Profit = 60% of sales (as per gross profit ratio)

       = 60% of 179000 = 107400

• COGS = Opening Stock + Net Purchase + direct expenses - Closing Stock

* Net purchase = Purchase - purchase return = 111000 - 4500 = 106500

*Direct Expense = Freight Inwards = 3100

Putting all values in formula :- Net Sales = COGS + Gross Profit

179000 = (0 + 106500 + 3100 - closing stock) + 107400

179000 = 106500 + 3100 + 107400 - closing stock

179000 = 217000 - closing stock

closing stock = 217000 - 179000

closing stock = 38000