Blue Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost. Lumber 25% Millwork 30% Hardware and fittings 40% On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were maintained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction.
Lumber
Millwork
Hardware
Inventory, Jan. 1, 2014 $265,900 $93,470 $45,600
Purchases to Aug. 18, 2014 1,544,900 375,100 160,300
Sales to Aug. 18, 2014 2,064,500 538,590 261,240
Submit your estimate of the inventory amounts immediately preceding the fire.
Inventory $
Lumber $
Millwork $
Hardware $__

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anthougo anthougo · Answer 1 · 2021-11-05T12:26:23+01:00

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

Estimating the Cost of Goods Sold:

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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