# Mark Price Company uses the gross profit method to estimate

Mark Price Company uses the gross profit method to estimate inventory

for monthly reporting purposes. Presented below is information for the month of May.

Inventory, May 1 $ 160,000

Purchases (gross) 640,000

Freight-in 30,000

Sales 1,000,000

Sales returns 70,000

Purchase discounts 12,000

Instructions

(a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales.

(b) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost.

https://brainmass.com/economics/output-and-costs/mark-price-company-uses-the-gross-profit-method-to-estimate-437087

#### Solution Preview

a) SALES $ 930,000

Less: COGS

Beginning Inventory $ 160,000

Purchases (net) $ 628,000

Freight In $ 30,000

COG Available $ 818,000

Less: ...

#### Solution Summary

Mark Price Company uses the gross profit method to estimate inventory

for monthly reporting purposes. Presented below is information for the month of May.

Inventory, May 1 $ 160,000

Purchases (gross) 640,000

Freight-in 30,000

Sales 1,000,000

Sales returns 70,000

Purchase discounts 12,000

Instructions

(a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales.

(b) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost.