Blarney Ltd.had a fire at its warehouse and was trying to determine the cost of the inventory lost.For the year to date sales had been $525,000, opening inventory was $25,000, purchases to date were $198,000, the cost-to-sales ratio is normally 60%.Inventory not damaged in the fire was $18,000.What was the cost of the inventory damaged in the fire?

Question

Quizplus · Accepted Answer

Cost of goods sold = Sales x Cost-to-sales ratio= $525,000 x 60%= $315,000Cost of goods available for sale = Opening inventory + Purchases= $25,000 + $198,000= $223,000Cost of inventory damaged in the fire = Cost of goods available for sale - Inventory not damaged in the fire= $223,000 - $18,000= $110,000