Up to the Date of a Fire That Completely Destroyed

question 64

Essay

Up to the date of a fire that completely destroyed Clark's inventory,Clark had sales of $4,000,000,purchases of $3,600,000,and freight-in of $160,000.The cost of beginning inventory was $280,000 and the company's typical gross profit was 40 percent.Using the gross profit method,estimate Clark's inventory loss from the fire.(Show your work.)

---

Definitions:

Allocation Base A

An allocation base is a measure or quantity, such as machine hours or labor costs, used to assign indirect costs to different products or services.

Allocation Base B

A criterion or standard used to distribute overhead costs among various cost objects.

Step-down Method

A cost allocation method used in accounting to distribute overhead costs to various cost objects based on a hierarchical sequence of allocation bases.

Custodial Services

These are services related to the maintenance and cleaning of buildings and facilities.