On January 31, 2016, the manufacturing facility of a medium-sized company was severely damaged by an accidental fire. As a result, the company's direct materials, work in process, and finished goods inventories were destroyed. The company did have access to certain incomplete accounting records, which revealed the following:
1. Beginning inventories, January 1, 2016
Direct materials ......................... $32,000
Finished goods .......................... $30,000
Work in process .......................... $68,000
2. Key ratios for the month of January 2016:
Gross profit = 20% of sales
Prime costs = 70% of manufacturing costs
Factory overhead = 40% of conversion costs
Ending work in process is always 10% of the monthly manufacturing costs.
3. All costs are incurred evenly in the manufacturing process.
4. Actual operations data for the month of January 2016:
Sales ............................................ $900,000
Direct labour incurred ........................ $360,000
Direct materials purchases ................... $320,000
Instructions
(a) From the above data, reconstruct a cost of goods manufactured schedule.
(b) Calculate the total cost of inventory lost, and identify each category where possible (direct materials, work in process, and finished goods), at January 31, 2016.