Question: A massive re began in the production building of P ugerville

A massive fire began in the production building of Pflugerville Co. in the early morning of September 18, 2009. The fire destroyed all the company’s work in process. To determine the amount of the loss, Pflugerville Co. has gathered the following information:
• Sales for the period September 1 through September 17 were $110,000. The gross margin on product sales has typically been 30%.
• At the beginning of September, Work in Process Inventory contained $27,000 of goods.
• The finished goods warehouse was not affected by the fire. The Finished Goods Inventory account balance was $3,600 at the beginning of the month and $2,900 after an inventory count on the day of the fire.
• Records indicated that the company used $64,000 of direct material during the first 17 days of September.
• Wages paid to direct labor employees for the first 17 days of September totaled $8,750; direct labor employees are paid $7 per hour.
• The predetermined overhead rate was set using an expected total overhead of $176,400
and expected annual direct labor hours of 18,000.
(a) Determine the value of the lost work in process inventory for Pflugerville Co.
(b) What other information might Pflugerville Co. need to submit to the insurance company to substantiate its loss claim?

  • CreatedMarch 27, 2015
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