Reference no: EM133003015

On 11 December after the close of business, a devastating fire at Biopharm Pte Ltd destroyed the firm's work in process and finished goods inventories. The following information is available:
$

Sales revenue, 1 January to 11 December 1,980,000
Purchases, 1 January to 11 December 300,000
Income before taxes, 1 January to 11 December 408,000
Direct labour cost, 1 January to 11 December 720,000
Cost of goods available for sale, 1 January to 11 December 1,650,000
Raw material inventory, 1 January 60,000
Work in process inventory, 1 January 126,000
Finished goods inventory, 1 January 222,000
Gross profit margin 30%

The firm's accountant determines that the cost of direct materials used normally averages 25% of prime costs. In addition, manufacturing overhead is 50% of the firm's total manufacturing costs.

Required:

Problem 1: Biopharm Pte Ltd is in the process of negotiating a settlement with its insurance company. Estimate and determine an estimate of the cost of work in process and finished goods inventories that were destroyed by the fire. Show all workings.