Question

Concord Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May. Inventory, May 1 Purchases (gross) Freight-in Sales revenue Sales returns Purchase discounts $ 162,000 637,500 28,600 1,031,100 69,600 11,500 Compute the estimated inventory at May 31, assuming that the gross profit is 25% of net sales. The estimated inventory at May 31 $ e Textbook and Media Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost. (Round percentage of sales to 2 decimal places, e.g. 78.74% and final answer to 0 decimal places, e.g. 6,225.) The estimated inventory at May 31 $

Answer 1

Total cost. = Beginning inventory + purchase - purchase discount + frieght in

= 162,000 + 637,500 - 11,500 + 28,600

= $816,600

Total sales = Sales revenue - Sales return

= 1,031,100 - 69,600

= $961,500

1) Ending inventory if markup is 25% of net sales

Gross profit = 961,500*25% = $240,375

= Total cost - (Net sales - Gross profit)

= 816,600 - (961,500 - 240,375)

= $95,475

2) If gross profit is 25% of cost = 20% on net sales

Gross profit = 20% of 961,500

= 192,300

= 816,600 - (961,500 - 192,300)

= $47,400

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