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Estimating Inventory Using Gross Profit Method The following data is from Netflicks Company for 2020. Sales...

Estimating Inventory Using Gross Profit Method

The following data is from Netflicks Company for 2020.

Sales revenue $312,000
Beginning inventory 41,600
Purchases 208,000

For each separate case a through e, estimate ending inventory.

a. Markup is 50% on cost. ?
b. Markup is 60% on sales. ?
c. Markup is 25% on cost. ?
d. Markup is 40% on sales. ?
e. Markup is 60% on cost. ?
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Answer #1

Solution :

Markup when it is on Cost = [Sales / (100+ Markup)] * Markup

Markup when it is on Sales = Sales * Markup%

Case Sales Markup Markup Working Cost of Goods Sold* Ending Inventory**
a $ 312,000 Markup is 50% on cost.

$ 312,000 / 150 * 50

= $ 104,000

 $ 208,000 $ 41,600
b $ 312,000 Markup is 60% on sales

$ 312,000 * 60%

= $ 187,200

 $ 124,800 $ 124,800
c $ 312,000 Markup is 25% on cost.

$ 312,000 / 125 * 25

= $ 62,400

 $ 249,600 $ 0
d $ 312,000 Markup is 40% on sales

$ 312,000 * 40%

= 124,800

 $ 187,200 $ 62,400
e $ 312,000 Markup is 60% on cost

$ 312,000 / 160 * 60

= $ 117,000

 $ 195,000 $ 54,600

*Cost of Goods Sold = Sales - Markup

**Ending Inventory = Op. Inventory + Purchases - Cost of Goods Sold

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