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    Kingram1210's Avatar
    Kingram1210 Posts: 1, Reputation: 1
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    #1

    Nov 19, 2009, 05:02 PM
    How to determine the cost of merchandise destroyed
    I am trying to figure out the cost of merchandise destroyed on Feb. 7th given the following information:

    Jan 1. Merchandise inventory $144,200
    Jan. 1-Feb. 7 Purchases (net) 40,000
    Jan. 1-Feb. 7 Sales (net) 70,000
    Estimated gross profit rate: 40%
    (gross profit rate=gross profit/net sales)

    I know that ending inventory is beginning+purchases-cogs, I'm not sure how to go about getting there though, and when I do, is the answer going to be 60% of what I get? I'm just not too sure the right steps to take.
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #2

    Nov 20, 2009, 12:11 AM

    You're just a couple of steps away. You have the beginning balance and the purchases, but no COGS. But you do have sales.

    Keep in mind that sales and COGS is the same inventory, one at retail and one at cost. No, you can't get straight there with that, but what is sales less COGS?

    Think about it.
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