Exercise

Tim Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $38,850. Purchases since January 1 were $92,740; freight-in, $4,800; purchase returns and allowances, $2,200. Sales are made at 33 1/3% above cost and totaled $132,600 to March 9. Goods costing $11,830 were left undamaged by the fire; remaining goods were destroyed.

(a) Compute the cost of goods destroyed.

Cost of goods destroyed

(b) Compute the cost of goods destroyed, assuming that the gross profit is 33 1/3% of sales. (Round ratios for computational purposes to 5 decimal places, e.g. 78.72345% and final answer to 0 decimal places, e.g. 28,987.)