Use the COGS model to make management decisions
Response to the following problem:
York Farm Supply, Inc., began September with inventory of $45,700. The business made net purchases of $62,300 and had net sales of $107,600 before a fire destroyed the company's inventory. For the past several years, York Farm Supply's gross profit percentage has been 45%. Estimate the cost of the inventory destroyed by the fire. Identify another reason that owners and managers use the gross profit method to estimate inventory.