A company's warehouse was destroyed by a tornado on October 15. The following information was the only information that was salvaged:

1. Inventory, beginning: $28,000

2. Purchases for the period: $17,000

3. Sales for the period: $55,000

4. Sales returns for the period: $700

The company's average gross profit ratio is 40%. What is the estimated cost of the lost inventory? Please show all caluclations.