Bao Company lost all of its inventory in a fire on December 26, 2020. The accounting records showed the following gross profit data for November and December.

Bao is fully insured for fire losses but must prepare a report for the insurance company.

Instructions
a. Compute the gross profit rate for November.
b. Using the gross profit rate for November, determine the estimated cost of the inventory lost in the fire.

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December November (to 12/26) $600,000 $700,000 36,000 Net sales Beginning inventory 32,000 389,000 Purchases 420,000 14,900 Purchase returns and allowances 13,300 8,500 Purchase discounts 9,500 Freight-in Ending inventory 8,800 9,900 36,000