document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1195814>Question 1195814</A>: <I><SPAN STYLE=\"word-break: break-all;\"> 107. On August 31, a hurricane destroyed a retail location of Vinny's Clothier including the entire inventory on hand at the location. The inventory on hand as of June 30 totaled $960,000. Since June 30 until the time of the hurricane, the company made purchases of $255,000 and had sales of $750,000. Assuming the rate of gross profit to selling price is 40%, what is the approximate value of the inventory that was destroyed?<BR>\n" );
document.write( "a. $960,000.<BR>\n" );
document.write( "b. $544,500.<BR>\n" );
document.write( "c. $615,000.<BR>\n" );
document.write( "d. $765,000. </SPAN>\n" );
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document.write( "The gross profit percentage formula is:<BR>\n" );
document.write( "Gross profit = [ (sales - cost)/sales ] * 100%\r<BR>\n" );
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document.write( "The term \"sales\" is interchangeable with \"revenue\". It's the amount of money the company brings in.<BR>\n" );
document.write( "The cost is the amount of money going out. <BR>\n" );
document.write( "The subtraction of these two items gives the profit.<BR>\n" );
document.write( "Therefore, the gross profit is the percentage of sales. <BR>\n" );
document.write( "In this case, a 40% gross profit means the company makes $40 for every $100 sold.\r<BR>\n" );
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document.write( "Let x be the unknown cost of goods sold.\r<BR>\n" );
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document.write( "So,<BR>\n" );
document.write( "Gross profit = [ (sales - cost)/sales ] * 100%<BR>\n" );
document.write( "40% = [ (750,000 - x)/(750,000) ] * 100%<BR>\n" );
document.write( "40/100 =  (750,000 - x)/(750,000)<BR>\n" );
document.write( "0.40 =  (750,000 - x)/(750,000)<BR>\n" );
document.write( "0.40*750,000 =  750,000 - x<BR>\n" );
document.write( "300,000 =  750,000 - x<BR>\n" );
document.write( "300,000 + x =  750,000<BR>\n" );
document.write( "x =  750,000 - 300,000<BR>\n" );
document.write( "x = 450,000\r<BR>\n" );
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document.write( "$450,000 was the cost of goods sold during the period of June 30 to August 31. <BR>\n" );
document.write( "This is the cost for the company (and not the amount of money the company pulls in). This is part of their expenses. \r<BR>\n" );
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document.write( "The company starts with $960,000 in inventory on hand for June 30th. Subtract off the $450,000 calculated earlier since this amount of goods were sold. This dollar amount of inventory has left their premises.\r<BR>\n" );
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document.write( "960,000 - 450,000 = 510,000\r<BR>\n" );
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document.write( "Then add on the $255,000 to represent the new inventory purchased. Assume that only inventory was bought here. That means we don't include things like office furniture or computers to help run the business; we only focus on things that will be sold to the customer. \r<BR>\n" );
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document.write( "510,000 + 255,000 = <font color=red>$765,000</font> is the final answer (<font color=red>choice D</font>)<BR>\n" );
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