Compute estimated cost of each of toppings lost in, Ask an Expert

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Q1) Redbird supplies ice cream shops with different toppings for ice cream sundaes. On November 17, 2009, a fire in Redbird's warehouse ruined all the toppings stored in that section. Redbird should give its insurance company with the estimate of amount of inventory lost. Following information is available from company's accounting records:

	Fruit Toppings	Marshmallow Toppings	Chocolate Toppings
Inventory, January 1, 2009	$20,000	$7,000	$3,000
Net purchases through Nov 17	150,000	36,000	12,000
Net sales through Nov 17	200,000	55,000	20,000
Historical gross profit rates	20%	30%	35%

a) Compute estimated cost of each of toppings lost in fire.

b) prepare down the factors that could cause estimates to be over- or understated?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M916898

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