A Fire Destroyed the Winston Company's Warehouse on March 15

A fire destroyed the Winston Company's warehouse on March 15, 2010.Only goods with a normal selling price of $12, 500 and a net realizable value of $5, 000 were saved.The following information is available from the company's records:
$\begin{array}{ll}\text { Inventory in warehouse, } 1 / 1 / 10 & \$ 250,000 \\\text { Purchases, } 1 / 1 / 10-3 / 15 / 10 & 620,000 \\\text { Purchase returns } & 9,500 \\\text { Freight-in } & 14,000 \\\text { Sales, } 1 / 1 / 10-3 / 15 / 10 & 850,000 \\\text { Sales returns } & 20,000\end{array}$ For the period from 2006 through 2009, Winston had a gross profit of $2, 100, 000 on net sales of $6, 000, 000.
Required:
a. Estimate Winstons inventory loss from the fire using the gross profit method.
b. What assumptions allow the use of the gross profit metho din these circumstances?