Question

Fenwick Corporation’s manufacturing and finished goods warehouse facilities burned to the ground on January 31. 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 . . . . . . . . . . . . 34,000
Materials Inventory, January 1 . . . . . . . . . . . . . . . .. 16,000
Finished Goods Inventory, January 1 . . . . . . . . . . ... 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 fire.
On the basis of the information shown above, compute the cost of the following inventories lost in the fire.
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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  • CreatedApril 17, 2014
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