Seismic Activity Metrics Ltd. lost most of its inventory in an earthquake and subsequent fire that destroyed the company’s warehouse and retail store in 2024. Fortunately, the accounting records were backed up and saved in the company’s vault, which was not destroyed in the fire and could, therefore, be recovered. However, Seismic uses the periodic inventory system. Therefore, it could not determine the amount of inventory that was lost in the earthquake and fire because the inventory was destroyed. Seismic’s insurance company requires Seismic to prepare a reasonable estimate of the lost inventory before it can process the insurance claim.
You are Seismic’s VP of Finance. You reviewed the accounting records for 2023 and 2024 (to the date of the earthquake) and obtained the following information: 

1. Sales in 2023 were $4,450,000. 

2. Sales in 2024 up to the time of the fire amounted to $3.6 million. 3. Gross margin in 2023 was $1,350,000. 

4. 2024 inventory purchased to the date of the earthquake totalled $1,358,000. 

5. The ending inventory reported on the 2023 statement of financial position was $5.6 million.

Required
Prepare an estimate of the amount of inventory lost in the earthquake and fire. Round gross profit percentage to the nearest whole percentage.