A retail store prices its goods to achieve a gross margin of 30 percent.Up to the date of a fire that destroyed the store's inventory,sales were $400,000 and cost of goods available for sale was $300,000.The estimated cost of the inventory destroyed is

Question

Quizplus · Accepted Answer

Gross margin is the difference between sales and cost of goods sold, divided by sales. In this case, the gross margin is 30%, so the cost of goods sold is 70% of sales. The cost of goods available for sale is $300,000, so the cost of goods sold is $280,000 (70% of $400,000). The estimated cost of the inventory destroyed is the difference between the cost of goods available for sale and the cost of goods sold, which is $20,000.

A Retail Store Prices Its Goods to Achieve a Gross