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Sir a little problem with this.
Gross profit marginal 50%. A fire destroyed a considerable part of the inventory.
sales $ $281250
opening inventory 183,600
purchases 249,200
closing inventory 204600using this information, what inventory loss has occurred?
A-$61,050
B-$87,575
C-$40700
D-$110,850I got B but the answer is C, I don’t know why.
You have mistyped the question. It must have said that the ‘gross profit mark-up was 50%’ (i.e. the profit was 50% of cost)
The cost of goods sold were 282150 x 100/150 = 188100.
The goods available for sale were 183600 + 249200 = 432800.
Therefore the closing inventory should have been 432800 – 188100 = 244700.However, the actual closing inventory was 204600, so the amount lost in the fire must have been 244700 – 204600 =40100
(Either you have mistyped answer C (or part of the question) or there is a mistake in your book)
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