An entity reported the following information for the current year:

Inventory, January 1 5,000,000

Purchases 36,000,000

Freight in 2,000,000

Purchase returns and allowances 3,500,000

Purchase discounts 1,500,000

Sales 43,000,000

Sales returns 3,000,000

Sales discounts 1,000,000

A physical inventory taken at year-end resulted in an ending inventory of P3,000,000. At year-end, unsold goods

out on consignment with selling price of P 1,000,000 are in the hands of a consignee. The gross profit was 25%

on cost. What is the estimated cost of inventory shortage?

a. 2,000,000

b. 3,000,000

c. 2,200,000

d. 4,250,000