Question
The company has a constant gross profit rate of 40% of net sales. The following accounting data are available for the current year 2020 :
The company has a constant gross profit rate of 40% of net sales. The following accounting data are available for the current year 2020 :
Inventory - January 1, 2020 6,250,000
Purchases 32,500,000
Freight in 2,500,000
Purchase discounts 1,875,000
Purchase returns and allowances 4,375,000
Sales 50,000,000
Sales returns 3,750,000
Sales discounts 1,250,000
Sales allowances 625,000
A physical inventory conducted at year-end resulted in an ending inventory costing P5,000,000. At year-end, unsold goods out on consignment with selling price of P1,250,000 are in the hands of the consignee. Goods costing P600,000 were shipped FOB shipping point to customer on December 31, 2020.
Required: What is the estimated cost of inventory shortage?
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