The inventory of Wildhorse Co. was destroyed by fire on March 1. From an examination of the accounting records, the following data for the first 2 months of the year are obtained: Sales Revenue $51,500, Sales Returns and Allowances $1,200, Purchases $40,000, Freight-In $1,200, and Purchase Returns and Allowances $1,500. Determine the merchandise lost by fire, assuming:

A beginning inventory of $25,500 and a gross profit rate of 45% on net sales.