Gross Profit Method
Ohana Company Uses the Gross Profit Method

Gross profit method
Ohana Company uses the gross profit method to estimate inventory for monthly reports. Information follows for the month of November:
$$\begin{array} { l l } \text { Inventory, Nov 1 } & \$ 978,000 \\\text { Purchases } & 691,000 \\\text { Freight-in } & 47,00 \\\text { 5ales } & 1,450,000 \\\text { 5ales returns } & 67,600 \\\text { Purchase discounts } & 14,100\end{array}$$ Instructions
a) Calculate the estimated inventory at November 30, assuming that the gross profit is 30% of sales.
b) Calculate the estimated inventory at November 30, assuming that the markup on cost is 30%.