Southern Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2024,
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Southern Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2024, a fire resulted in the loss of all of the toppings stored in one section of the warehouse. The company must provide its insurance company with an estimate of the amount of inventory lost. The following information is available from the company’s accounting records:
Required:
1. Calculate the estimated cost of each of the toppings lost in the fire.
2. What factors could cause the estimates to be over- or understated?
Transcribed Image Text:
Inventory, January 1, 2024 Net purchases through Nov. 17 Net sales through Nov. 17 Historical gross profit ratio Fruit Toppings $ 20,000 150,000 200,000 20% Marshmallow Toppings $7,000 36,000 55,000 30% Chocolate Toppings $ 3,000 12,000 20,000 35%
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