Question

A tornado struck the only manufacturing plant of Toledo Farm Implements (TFI) on June 1. All work-in-process inventory was destroyed, but a few records were salvaged from the wreckage and from the company's headquarters. If acceptable documentation is provided, the loss will be covered by insurance. The insurable value of work-in-process inventory consists of direct materials, direct labor, and applied overhead.

The following information about the plant appears on the April financial statements at the company's downtown headquarters: Materials inventory, April 30 Work-in-process inventory, April 30 Finished goods inventory, April 30 Cost of goods sold through April 30 Accounts payable (materials suppliers), April 30 Manufacturing overhead through April 30 Payroll payable, April 30 Withholding and other payroll liabilities, April 30 Overhead applied through April 30 $ 97,000 163,000 67,000 696,500 42,900 367,900 19,300 359,400 A count of the inventories on hand May 31 shows the following: Materials inventory Work-in-process inventory Finished goods inventory $84,000 ? 75,000 The accounts payable clerk tells you that outstanding bills to suppliers totaled $101,200 and that cash payments of $74,400 were made to them during the month. She informs you that the payroll costs last month for the manufacturing section included $157,000, of which $28,600 was indirect labor. At the end of May, the following balances were available from the main office: Manufacturing overhead through May 31 Cost of goods sold through May 31 $429,000 789,800 Recall that each month there is only one requisition for indirect materials. Among the fragments of paper, you located the following information, which you have neatly typed for your records: From scrap found under desk: indirect materials – $4,214 You also learn that the overhead during the month was overapplied by $2,600. Required: Determine the cost of the work-in-process inventory lost in the disaster. Direct materials Direct labor Overhead applied Cost transferred to finished goods inventory Disaster loss

Answer 1

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Toledo
Calculating value of Purchases:	Amount $
Accounts payable, ending	101,200.00
Add: Cash payments	74,400.00
Less: Accounts payable, beginning	(42,900.00)
Purchases in May	132,700.00
Calculating value of Direct materials used:	Amount $
Beginning inventory	97,000.00
Add: Purchases	132,700.00
Less: Ending inventory	(84,000.00)
Less: Indirect materials	(4,214.00)
Direct materials used in May	141,486.00
Calculating value of Direct labor used:	Amount $
Payroll costs	157,000.00
Less: Indirect labor	(28,600.00)
Direct labor used in May	128,400.00
Cost of goods sold in May	Amount $
Cost of goods sold through May	789,800.00
Less: Cost of goods sold through April	(696,500.00)
Cost of goods sold in May	93,300.00
Cost transferred to finished goods inventory	Amount $
Finished goods, ending	75,000.00
Add: Cost of goods sold in May	93,300.00
Less: Finished goods, beginning	(67,000.00)
Cost transferred to finished goods inventory in May	101,300.00
Overhead applied	Amount $
Ending manufacturing overhead	429,000.00
Less: Beginning manufacturing overhead	(367,900.00)
Add: Over applied overhead	2,600.00
Overhead applied	63,700.00
Disaster Loss	Amount $
Work in Process Balance, beginning	163,000.00
Add: Direct materials used in May	141,486.00
Add: Direct labor used in May	128,400.00
Add: Overhead applied	63,700.00
Less: Cost transferred to finished goods inventory in May	(101,300.00)
Disaster Loss	395,286.00