Smith Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2016, a fire resulted in the loss of all of the toppings stored in one section of the warehouse. The company must provide its insurance company with an estimate of the amount of inventory lost. The following information is available from the companys accounting records:

	Fruit toppings	Marshmellow toppings	Chocolate toppings
Inventory, January 1, 2016	$20,000	$7,000	$3,000
Net purchaes thru Nov. 17	150,000	36,000	12,000
Net sales thru Nov. 17	200,000	55,000	20,000
Historical gross profit ratio	20%	30%	35%

Required:

1. Calculate the estimated cost of each of the toppings lost in the fire.

2. What factors could cause the estimates to be over-or understated?