Question

Smith Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2018, a fire resulted in the loss of all of the toppings stored in one section of the warehouse. The company must provide its insurance company with an estimate of the amount of inventory lost. The following information is available from the company's accounting records: Fruit Toppings Marshmallow Toppings Chocolate Toppings Inventory, January 1, 2018 $ 13,000 $ 6,300 $ 2,300 Net purchases through Nov. 17 115,000 29,000 11,300 Net sales through Nov. 17 165,000 48,000 19,300 Historical gross profit ratio 30 % 35 % 35 % Required: 1. Calculate the estimated cost of each of the toppings lost in the fire.

Answer 1

• All working forms part of the answer
• Working and Answer

Working		Fruit	Marshmallow	Chocolate
A	Net Sales	$         165,000.00	$          48,000.00	$          19,300.00
B	GP ratio	30%	35%	35%
C = A x B	Gross Profits	$           49,500.00	$          16,800.00	$            6,755.00
D = A - C	Cost of Goods Sold	$         115,500.00	$          31,200.00	$          12,545.00
E	Beginning Inventory	$           13,000.00	$            6,300.00	$            2,300.00
F	Net Purchases	$         115,000.00	$          29,000.00	$          11,300.00
G = E+F	Cost of Goods available for sale	$         128,000.00	$          35,300.00	$          13,600.00
H = G - D	Estimated Cost of Toppings lost in fire = ANSWER	$           12,500.00 = Answer	$            4,100.00 = Answer	$            1,055.00 = Answer