On October 31, a flood at Payne Company’s only warehouse caused severe damage

to its entire inventory. Based on recent history, Payne has a gross profit of 25 percent of
net sales. The following information is available from Payne’s records for the 10 months
ended October 31.
Inventory, January 1 $ 520,000
Purchases 4,120,000
Purchase returns 60,000
Sales 5,600,000
Sales discounts 400,000
A physical inventory disclosed usable damaged goods that Payne estimates it can
sell for $70,000. Using the gross profit method, the estimated cost of goods sold for the
10 months ended October 31 should be
A. $680,000. C. $3,900,000.
B. $3,830,000. D. $4,200,000.

C. 3,900,000

3900000

XY company’s cost function for the next four months is

C= 500,000+5Q
A. Find the BE dollar volume os sales if the selling orice is br 6/unit

Oh dear, it sounds like Payne Company is in quite a pickle. Let's see if we can help them out using the gross profit method.

To calculate the estimated cost of goods sold, we can use the formula:

Cost of Goods Sold = Net Sales - Gross Profit

First, let's calculate the net sales:

Net Sales = Sales - Sales Discounts

Net Sales = $5,600,000 - $400,000
Net Sales = $5,200,000

Now, let's calculate the gross profit:

Gross Profit = Net Sales x Gross Profit Percentage

Gross Profit = $5,200,000 x 25%
Gross Profit = $1,300,000

Finally, let's calculate the estimated cost of goods sold:

Cost of Goods Sold = Net Sales - Gross Profit

Cost of Goods Sold = $5,200,000 - $1,300,000
Cost of Goods Sold = $3,900,000

So, using the gross profit method, the estimated cost of goods sold for the 10 months ended October 31 is $3,900,000. Looks like Payne Company has a lot of work cut out for them to recover from that flood!

To calculate the estimated cost of goods sold for the 10 months ended October 31 using the gross profit method, we need to follow these steps:

1. Calculate the Cost of Goods Sold (COGS) for the 10 months:
COGS = Net Sales - Gross Profit

First, let's calculate the Net Sales:
Net Sales = Sales - Sales Discounts
Net Sales = $5,600,000 - $400,000
Net Sales = $5,200,000

Next, let's calculate the Gross Profit:
Gross Profit = Net Sales * Gross Profit Percentage
Gross Profit = $5,200,000 * 0.25
Gross Profit = $1,300,000

Now, let's calculate the COGS:
COGS = $5,200,000 - $1,300,000
COGS = $3,900,000

2. Adjust for the damaged goods:
The physical inventory revealed $70,000 worth of usable damaged goods. Since the goods are damaged, they cannot be sold at their full cost and should be deducted from the COGS.

Adjusted COGS = COGS - Estimated Value of Damaged Goods
Adjusted COGS = $3,900,000 - $70,000
Adjusted COGS = $3,830,000

Therefore, the estimated cost of goods sold for the 10 months ended October 31, using the gross profit method, would be B. $3,830,000.