Textbook Problem

You are the warehouse manager for Discovery Kitchen Supplies. On a Sunday in May, you receive a phone call from the owner. He states that the entire building and contents were destroyed by fire. For the police report and the insurance claim, the owner has asked you to estimate the value of the lost inventory. Your records, which luckily were backed up on the hard drive of your home computer, indicate that at the time of the fire, the net sales to date were $615,400 and the purchases were $232,600. The beginning inventory on January 1 was $312,000. For the past three years, the company has operated at a gross margin of 60%. Use the gross profit method to calculate your answer.