Answer:
The estimated cost of inventory at the end of the first quarter is $327,250.
Explanation:
Gross profit : The gross profit represents the difference between sale price and purchase price.
The gross profit margin shows the ratio between gross profit and sales.
The calculation of cost of ending inventory is shown below:
First we have to calculate the cost of good sold.
Cost of goods sold = Beginning Merchandise inventory + Purchase of merchandise inventory - Returned Merchandise inventory + Freight charges
= $225,000 + $795,000 - $11,550 + $18,800
= $1,027,250
Now, we have to calculate the approximate cost of goods sold.
Since gross profit is 30% and net sales is $1,000,000
And, The Gross profit = Sales - cost of goods sold
So the Approximate cost of good sold = Net sales × (1 - 30%)
= $1,000,000 × 70%
= $700,000
Here 70% is the cost of goods sold percentage and 1 here denotes sales.
After considering these amounts, the ending inventory would be
= Cost of goods sold - Approximate cost of goods sold
= $1,027,250 - $700,000
= $327,250
Hence, the estimated cost of inventory at the end of the first quarter is $327,250.
