Big Sky Ltd

Essay

Big Sky Ltd. attempts to price merchandise so as to yield a gross margin of 25 percent based on selling price. If the inventory on August 1 was $30,000 and sales and purchases during August and September were as given below, compute a reliable estimate of the inventory at the end of each month. $\begin{array} { | l | l | l | l | } \hline \text { Month } & \text { Sales } & \text { Purchases } & \text { Ending Inventory } \\\hline \text { August } & \$ 160,000 & \$ 126,000 & \$ \\\hline \text { September } & 180,000 & 128,000 & \$ \\\hline\end{array}$