Question: A distraught employee, Guy Arson, put a torch to a manufacturing plant on February 26. The resulting blaze completely destroyed the plant and its contents.

A distraught employee, Guy Arson, put a torch to a manufacturing plant on February 26. The resulting blaze completely destroyed the plant and its contents. Fortunately, some accounting records were kept in another building. They revealed the following for the period from January 1 to February 26:

Direct materials (DM) Inventory Jan 1 19,200

Purchases DM Jan 1 to Feb 26 192,000

Ending DM inventory Feb 26 74,400

Work in Progress (WIP) Jan 1 40,800

Cost of direct labour 216,000

Cost of Overhead used 144,000

Work in Progress Feb 26 33,600

Finished Goods (FG) Jan 1 36,000

Finished Goods Feb 26 60,000

Calculate the following:

Cost of DM used

Cost of finished goods produced

Cost of goods sold

Total value of DM, WIP and FG lost due to the fire

Where would you classify the cost of Insurance and why?

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