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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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