Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.
| Inventory, May 1 |
|
$178,400 |
| Purchases (gross) |
|
642,100 |
| Freight-in |
|
30,700 |
| Sales |
|
1,011,200 |
| Sales returns |
|
76,300 |
| Purchase discounts |
|
12,170 |
(a) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales.
(b) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.