National Distributing Company uses a periodic inventory system to track its merchandise inventory and the gross profit method to estimate ending inventory and cost of goods sold for interim periods. Net purchases for the month of August were $31,000. The July 31 and August 31, 2016, financial statements contained the following information:
| Income Statements |
| For the Months Ending |
| |
August 31, 2016 |
July 31, 2016 |
| Net sales |
$50,000 |
$40,000 |
| Balance Sheets At |
| |
August 31, 2016 |
July 31, 2016 |
| Assets: |
|
|
| Merchandise inventory |
$28,000 |
$27,000 |
Required:
Determine the company's cost percentage.