Westor Company lost all of its inventory in a fire on December 28, 2021. The accounting records showed the following gross profit data for November and December:

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

Instructions

a. Calculate gross profit for the month of November.

b. Calculate the gross profit margin percentage for November.

c. Determine the amount of inventory lost by Westor Company as a result of the fire using the gross profit method.

The insurance adjustor is concerned that this method of calculating the cost of the inventory destroyed might not be accurate. What factors contribute to the accuracy of the ending inventory amount when using the gross profit method?