Asked by Michael Swihart on Jul 29, 2024
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During August, the first month of the fiscal year, sales totaled $875,000 and the cost of merchandise available for sale totaled $850,000. Estimate the cost of the inventory as of August 31, based on an estimated gross profit rate of 45%.
Gross Profit Rate
The gross profit rate, also known as gross profit margin, is the ratio of gross profit (sales minus cost of goods sold) to sales, expressed as a percentage.
Merchandise Available
The total quantity of goods available for sale, including beginning inventory plus purchases made during the period.
Estimated Gross Profit
An approximate calculation of a company's gross profit, predicted based on past data and future projections.
- Utilize the retail inventory approach for estimating the costs of inventory.
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Learning Objectives
- Utilize the retail inventory approach for estimating the costs of inventory.
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