Reference no: EM132166292
CASE - Inventory calculations with incomplete information
Hector P. Wastrel, a careless employee, left flammable materials near an open flame at the Salter plant. There was an explosion and a fire destroyed the whole plant and the administrative offices. Justin Quick, the company's controller, and Constance True heart, operations manager, barely saved any of the information when they escaped the roar of the fire.
"What a disaster," Justin said. And the worst thing is that we do not have records to collect the insurance.
"I know," said Constance. I was at the plant when the explosion occurred and I only managed to take this report containing information on one or two of our costs. He says that our direct labor costs this year totaled $ 180,000 and that we purchased $ 290,000 in Materials (raw material). But I'm afraid it's not a big deal; the rest of our records are ashes.
"Well, not completely," Justin said. I was working on the income statement so far this year when the explosion threw me out of the chair. By instinct, I clung to the sheet of my calculations and as far as I can see, our sales this year to date amount to $ 1 200 000 monetary units and our gross profit rate was 40% on sales. I also see that our assets for sale to customers totaled $ 810,000 at cost.
"Maybe we're not so bad, after all," Constance exclaimed. My worksheet says that the cost of prime costs totaled $ 410,000 so far this year and the overall manufacturing costs were 70% of the conversion cost. If we had some information about our initial inventories.
Watch this! Justin shouted. It is a copy of last year's annual report. Show our inventories when the year began. Let's see, of raw materials was $ 18,000, assets in process of $ 65,000, and finished goods, of $ 45,000.
Magnificent! Cried Constance. We are going to work. To request the payment of the insurance, the company must determine the amount of the costs of its inventories at the date of the fire. Assume that all the materials for the production of the year were direct materials.
Required: Determine the final balance of the inventory of materials (raw material), the inventory of goods in process and the inventory of finished goods at the date of the fire.