Inventory estimates, partial data: manufacturer On April 12, after the close of business. Goldstein & Sons had a devastating fire that destroyed the firm's work in process and finished goods inventories. Fortunately, all raw materials escaped damage because materials owned by the firm were stored in another warehouse. The following information is available:
Sales revenue, 1 January to April 12..................................$330000
Income before taxes, 1 January to April 12............................68,000
Direct labour cost, 1 January to April 12..............................120,000
Cost of goods available for sale, 1 January to 12 April.............275,000
Work in process inventory, 1 January..................................21,000
Finished goods inventory, 1 January...................................37,000
Gross profit margin.................................................30% of sales
The firm's accountants determined that the cost of direct materials used normally averages 25 percent of prime costs. In addition, manufacturing overhead is so percent of the firm's total manufacturing costs.
Required:
Goldstein & Sons is in the process of negotiating a settlement with its insurance company. Prepare an estimate of the cost of work in process and finished goods inventories that were destroyed by the fire.