Use gross profit ratio to calculate inventory loss
Response to the following problem:
Franklin Co. has experienced gross profit ratios for 2013, 2012, and 2011 of 33%, 30%, and 31%, respectively. On April 3, 2014, the firm's plant and all of its inventory were destroyed by a tornado. Accounting records for 2014, which were available because they were stored in a protected vault, showed the following:
Sales from January 1 thru April 2 $142,680
January, 1 inventory amount 63,590
Purchases of inventory from January 1 thru April 2 118,652
Required: Calculate the amount of the insurance claim to be filed for the inventory destroyed in the tornado.