Foamy Suds 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 $125,000,purchases to date were $318,000,and 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 inventory lost = Cost of goods sold - Opening inventory - Purchases to date + Inventory not damaged in the fire= $315,000 - $125,000 - $318,000 + $18,000= $110,000