Reconstruct Missing Data
A tornado struck the only manufacturing plant of Toledo Farm Implements (TFI) on June 1. All work-in-process inventory was destroyed, but a few records were salvaged from the wreckage and from the company’s headquarters. If acceptable documentation is provided, the loss will be covered by insurance. The insurable value of work-in-process inventory consists of direct materials, direct labor, and applied overhead.
The following information about the plant appears on the April financial statements at the company’s downtown headquarters:
A count of the inventories on hand May 31 shows the following:
The accounts payable clerk tells you that outstanding bills to suppliers totaled $100,200 and that cash payments of $75,800 were made to them during the month. She informs you that the payroll costs last month for the manufacturing section included $164,800, of which $29,400 was indirect labor.
At the end of May, the following balances were available from the main office:
Recall that each month there is only one requisition for indirect materials. Among the fragments of paper, you located the following information, which you have neatly typed for your records:
From scrap found under desk: indirect materials → $4,172
You also learn that the overhead during the month was overapplied by $2,400.
Required
Determine the cost of the work-in-process inventory lost in the disaster.
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FUNDAMENTALS OF COST ACCOUNTING
- On June 30, 2019, a flash flood damaged the warehouse and factory of Padway Corporation, completely destroying the work-in-process inventory. There was no damage to either the raw materials or finished goods inventories. A physical inventory taken after the flood revealed the following valuations: Raw materials $ 62,000 Work in process 0 Finished goods 119,000 The inventory on January 1, 2019, consisted of the following: Raw materials $ 30,000 Work in process 100,000 Finished goods 140,000 $270,000 A review of the books and records disclosed that the gross profit margin historically approximated 25% of sales. The sales for the first six months of 2019 were $340,000. Raw material purchases were $115,000. Direct labor costs for this period were $80,000, and manufacturing overhead was historically applied at 50% of direct labor. Required: Compute the value of the work-in-process inventory lost at June 30, 2019.arrow_forwardThe work in process inventories of Jungkook Manufacturing, Inc. were completely destroyed by fire on June 1, 2021. Amounts for the following accounts have been established.· Accounts payable, Jan. 1, 2021- P117,000· Accounts payable, Jun. 1, 2021- P135,000· Raw materials, Jan. 1, 2021- P15,000 · Raw materials, Jun. 1, 2021- P18,000· Work in process, Jan. 1, 2021- P60,000 · Finished goods, Jan. 1, 2021- P69,000 · Finished goods, Jun. 1, 2021- P87,000 The following additional information was determined: · Payments to suppliers for purchases on account, P60,000. · Freight on purchases, P3,000. · Purchase returns, P7,500. · Direct labor, P48,000. · Production overhead, P18,000. · Sales from January 1 to May 31, P225,000. · Sales returns, P45,000. · Sales discounts, P15,000. · Gross profit rate based on…arrow_forwardThe work-in-process inventories of ABC Manufacturing, Inc. were completely destroyed by fire on June 1, 2021. Amounts for the following accounts have been established. Accounts payable, Jan. 1, 2021: 117,000 Accounts payable, Jun. 1, 2021: 135,000 Raw materials, Jan. 1, 2021: 15,000 Raw materials, Jun. 1, 2021: 18,000 Work in process, Jan. 1, 2021: 60,000 Finished goods, Jan. 1, 2021: 69,000 Finished goods, Jun. 1, 2021: 87,000 The following additional information was determined: Payments to suppliers for purchases on account: 60,000. Freight on purchases: 3,000. Purchase returns: 7,500. Direct labor: 48,000. Production overhead: 18,000. Sales from January 1 to May 31: 225,000. Sales returns: 45,000. Sales discounts: 15,000. Gross profit rate based on sales: 25%. How much is the work in process destroyed by fire?arrow_forward
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- Equinox Fabrication Plant suffered a fire incident in August due to which most of the records for the year were destroyed. The following accounting data for the year that were recovered: Total manufacturing overhead estimated at the beginning of the year $105,840 Total direct labor costs estimated at the beginning of the year $186,000 Total direct labor hours estimated at the beginning of the year 3,600 direct labor hours Actual manufacturing overhead costs for the year $99,760 Actual direct labor costs for the year $142,000 Actual direct labor hours for the year 2,950 direct labor hours The company bases its manufacturing overhead allocation on direct labor hours. What was the predetermined overhead allocation rate for the year?arrow_forwardThe financial records for the Harrison Manufacturing Company have been destroyed in a fire. The following information has been obtained from a separate set of books maintained by the cost accountant. The cost accountant now asks for your assistance in computing the missing amounts. Direct Materials Inventory 8,900 ? ? Beg. Bal. Purchases End. Bal. Work-in-Process Inventory 8,400 ? 19,800 14,400 8,900 Beg. Bal. Materials Labor Overhead End. Bal. Beg. Bal. 7,300 Cost of Goods Sold 66,000 Finished Goods Inventory ? Transferred in End. Bal. 40, 400 5,100 Transferred Out Transferred Out Transferred Out What is the value of the ending Work-in-Process inventory balance?arrow_forwardOn June 30, 2016, a flash flood damaged the warehouse and factory of Padway Corporation, completely destroying the work-in-process inventory. There was no damage to either the raw materials or finished goods inventories. A physical inventory taken after the flood revealed the following valuations: Raw materials $ 62,000 Work in process 0 Finished goods 119,000 The inventory on January 1, 2016 consisted of the following: Raw materials $ 30,000 Work in process 100,000 Finished goods 140,000 $270,000 A review of the books and records disclosed that the gross profit margin historically approximated 25% of sales. The sales for the first six months of 2016 were $340,000. Raw material purchases were $115,000. Direct labor costs for this period were $80,000, and manufacturing overhead was historically applied at 50% of direct labor.arrow_forward
- The WIP inventoris of DEF Mfgt Inc. were completely destroyed by fire on June 1, 20x1. Amounts for the ff accounts have been established. How mcuh is the work in process destroyed by fire?arrow_forwardSolve the given problem: (Show your complete solution) A mentally deranged employee, Mr. Arson, put a torch to a factory on February 20, 2018. The resulting fire completely destroyed the plant and its contents. Fortunately, certain accounting records were kept in another building. They revealed the following for the period December 31, 2017 to February 20, 2018: Prime cost, P301,000 Gross Profit, P100,000 or 20% of sales Cost of Goods Available for Sale, P460,000 Direct Materials purchased, P170,000 Work in process, December 31, 2017, P34,000 Direct materials, December 31, 2017, P16,000 Finished Goods, December 31, 2017, P30,000 Factory overhead, 40% of conversion cost Direct Labor, P180,000 The insurance company wants to know the approximate cost of the inventories as a basis for negotiating a settlement. Compute for the following: 1. Direct Materials Inventory, 2/20/2018 2. Work in Process Inventory, 2/20/2018 3. Finished Goods Inventory, 2/20/2018 4. Total Manufacturing Cost 5.…arrow_forwardOn 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 Income before taxes through April 12 Direct labor through April 12 Cost of goods available for sale, April 12 Work-in-process inventory, January 11 Finished-goods inventory, January 1 Gross margin $330,000 68,000 120,000 275,000 21,000 37,000 Cost of finished-goods inventory Cost of work-in-process inventory 30% of sales The firm's accountants determined that the cost of direct materials used normally averages 25 percent of prime costs (.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…arrow_forward
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