A flood destroyed a company’s warehouse contents on September 12. The following information was the only information that was salvaged: Inventory, beginning: $29,900 Purchases for the period: $18,900 Sales for the period: $56,900 Sales returns for the period: $890 The company's average gross profit ratio is 21%. What is the estimated cost of the lost inventory using the gross profit method?

The estimated cost of lost inventory = $4552.1

Explanation:

The cost of lost inventory = inventory,begining+purchases of the period-((1-avg gross profit ratio)(sales for the period-returns for the period))

The cost of lost inventory=$29900+$18900-((1-0.21)($56900-$890))

                                         =$48800-((0.79)(56010))

                                         =$48800-(44247.9)

                                         =$4552.1    

The estimated cost of lost inventory is $4552.1

business modeling is correct

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