Problem
Othello is a small pharmaceuticals store in Sydney. On the night of 27 June a fire incident destroyed the entire store and hence the inventory. The accounting records, which survived the fire, contained the following account balances for the period 1 January to 27 June:
Sales $330700
Sales returns and allowances $4200
Purchases $285000
Purchases returns and allowances $3150
Freight inwards $2400
Inventory balance, 1 January $59 300
Othello store has averaged 42% gross profit margin over the last 5 years.
Required (show all workings):
Determine the cost of the inventory that was destroyed, for insurance purposes.