Smith Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2021, 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, 2013 $22,000 $7,200 $3,200
Net purchases through Nov. 17 160,000 38,000 12,200
Net sales through Nov. 17 210,000 57,000 20,200
Historical gross profit ratio 20% 30% 30%

Required:
Calculate the estimated cost of each of the toppings lost in the fire.

Question

Answered

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TUNDEXIGO TUNDEXIGO · Answer 1

Answer:

Estimated cost of Fruit Toppings lost in the fire = $14,000

Estimated cost of Marshmallow Toppings lost in the fire = $5,300

Estimated cost of Chocolate Toppings lost in the fire = $1,260

Explanation:

Fruit Marshmallow Chocolate

Toppings Toppings Toppings

Inventory, January 1, 2013 [a] 22,000 7,200 3,200

Net purchases through Nov. 17 [b] 160,000 38,000 12,200

Net sales through Nov. 17 [c] 210,000 57,000 20,200

Historical gross profit ratio [d] 20 30 30

Gross Profit [c*d%] [e] 42000 17,100 6,060

Cost of Good Sold [c-e] [f] 168,000 39,900 14,140

Inventory, Nov 17, 2013 [a+b-f] [g] 14,000 5,300 1,260