Fenwick Corporation’s manufacturing and finished goods warehouse facilities burned to the ground on January 31. 2007. The loss was fully covered by insurance. The insurance company wanted to know the cost of the inventories destroyed in the fire. The company’s accountants gathered the following information:
Direct materials purchased in January | $160,000 |
Work in Process Inventory. January 1. 2007 | 34,000 |
Materials Inventory, January 1. 2007 | 16,000 |
Finished Goods Inventory. January 1. 2007 | 30,000 |
Direct labor costs incurred in January | 190,000 |
Prime costs charged to jobs in January | 294,000 |
Cost of finished goods available for sale in January | 450,000 |
Sales revenue earned in January | 500,000 |
Gross profit as a percentage of January sales | 25% |
Manufacturing overhead applied to jobs in January as a percentage of total conversion costs | 60% |
Assume that actual manufacturing overhead was exactly equal to the amount applied to production at the time of the lire.
Based upon the information shown above, compute the cost of the following inventories lost in the lire. (Hint: Prime costs and conversion costs were discussed in Chapter 16.)
a. Materials inventory (assume materials inventory is comprised entirely of direct materials).
b. Work in process inventory.
c. Finished goods inventory.
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