A company had sales of $180,000 and cost of goods available for sale of $200,000 during August. If its gross profit margin is estimated to be 30%, the ending inventory value at August 31 is estimated to be

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Quizplus · Accepted Answer

Gross profit is calculated as sales minus cost of goods sold (COGS). With a gross profit margin of 30%, the gross profit is 30% of sales, which is 30% of $180,000 = $54,000. Therefore, COGS is sales minus gross profit = $180,000 - $54,000 = $126,000. The cost of goods available for sale is the sum of the beginning inventory plus purchases during the period, which equals COGS plus ending inventory. So, $200,000 (cost of goods available for sale) = $126,000 (COGS) + ending inventory. Solving for ending inventory gives $200,000 - $126,000 = $74,000.

A Company Had Sales of $180,000 and Cost of Goods