Question 1195814

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?
a. $960,000.
b. $544,500.
c. $615,000.
d. $765,000.
<pre>Let D be the value of the destroyed, or otherwise, ending inventory  
Gross Profit/Margin/Income = Sales - COGS (Beginnining Inventory + Purchases - Ending Inventory)
                           = 750,000 - (960,000 + 255,000 - D)
                           = 750,000 - (1,215,000 - D)
                           = 750,000 - 1,215,000 + D
                           = - 465,000 + D
{{{matrix(2,3, "Gross_Profit/Margin/Income_%", "=", "(Gross_Profit/Margin/Income)"/Sales,                                            
".4", "=", "(- 465,000 + D)"/"750,000")}}}
                   - 465,000 + D = 300,000 ------- Cross-multiplying
  <font color = red><font size = 4><b>Destroyed inventory,</font></font></b> or D = 300,000 + 465,000 = <font color = red><font size = 4><b>$765,000 (CHOICE d.)</font></font></b>