On April 12, after the close of business, Singh & Sons had a devastating fire that destroyed the company’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 through April 12 .......................................$330,000 Income before taxes through April 12 .............................. 68,000 Direct

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On April 12, after the close of business, Singh & Sons had a devastating fire that destroyed the company’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 through April 12 .......................................$330,000

Income before taxes through April 12 .............................. 68,000

Direct labor through April 12 ............................................ 120,000

Cost of goods available for sale, April 12 ........................ 275,000

Work-in-process inventory, January 1 ................................ 21,000

Finished-goods inventory, January 1 ...................................37,000

Gross margin .................................................................30% of sales

The firm’s accountants determined that the cost of direct materials used normally averages 25 percent of prime costs (i.e., direct material + direct labor). In addition, manufacturing overhead is 50 percent of the firm’s total production costs.

Required:

Singh & 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.


Related Book For answer-question

Managerial Accounting

7th Edition

Authors: Ronald W Hilton

ISBN: 9780073022857