Market is a retail store selling small appliances and sporting goods. The business follows a policy of selling all merchandize at a price exactly twice its cost to the store and uses a periodic inventory system.

Net sales .................................$580,000

Inventory, January 1 ................... $58,000

Purchases during the year .............$297,000

A physical count indicates merchandize costing $49,250 is on hand at December 31.

Required:

1. Determine the gross profit for the year.

1. On seeing the gross profit figures the store owner makes the following comment: "Inventory shrinkage losses (shoplifting) are really costing me a lot". Do you agree with the owner? If yes, how much?

1. Assume the store can eliminate the shoplifting by hiring a security guard at a cost of $1,800 per month. Would this strategy be profitable? Explain.