The estimate of the inventory amounts before the fire is as follows:
Total Inventory $232,845
Lumber $159,200
Millwork $54,270
Hardware $19,375
Data and Calculations:
Lumber Millwork Hard & Fittings
Gross Markup (%) 25% 30% 40%
Gross Margin (%) 20% 23.1% 28.6%
= (25%/125%) (30%/130%) (40%/140%)
Inventory, Jan. 1 $265,900 $93,470 $45,600
Purchases 1,544,900 375,100 160,300
Goods available $1,810,800 $468,570 $205,900
Cost of goods sold 1,651,600 414,300 186,525
Ending inventory $159,200 $54,270 $19,375 $232,845
<u>Estimating the Cost of Goods Sold:</u>
Sales to Aug. 18 2,064,500 538,590 261,240
Gross profit 412,900 124,290 74,715
Cost of goods sold 1,651,600 414,300 186,525
Gross profit = Sales x Gross margin
Cost of goods sold = Sales - Gross profit or Sales x (1 - gross margin)
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