Question

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.

Materials inventory, April 30 $ 98,000

Work-in-process inventory, April 30 172,400

Finished goods inventory, April 30 64,000

Cost of goods sold through April 30 697,200

Accounts payable (materials suppliers), April 30 43,200

Manufacturing overhead through April 30 369,800

Payroll payable, April 30 –0–

Withholding and other payroll liabilities, April 30 19,400

Overhead applied through April 30 359,200

A count of the inventories on hand May 31 shows the following.
Materials inventory $86,000

Work-in-process inventory ?

Finished goods inventory 75,000

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

Manufacturing Overhead through May 31 $434,000

Cost of Goods Sold through May 31 793,200

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.

Determine the cost of the work-in-process inventory lost in the disaster.  

please show work and  provide 3-4 sentences interpreting the results of the solution provided

Answer 1

Answer:

Work in progress statement: (Working notes below)

Particulars	Amount	Particulars	Amount
Opening WIP	1,72,400$	Finished goods transferred	1,07,000$
Direct Material	1,40,628$	-	-
Direct Labour	1,35,400$	-	-
Overheads applied	66,600$	Disaster loss	4,08,028$

Working notes:

Calculation of purchases = Closing trade payable - opening trade payable + cash payments

= 100,200$ - 43,200$ + 75,800$

= 1,32,800 $

-----> Direct materials calculation

= Opening stock + purchases - closing stock - Indirect materials

= 98,000 $ + 1,32,800$ - 86,000$ - 4,172 (Scrap)

= 1,40,628$

-----> Calculation of direct labour:

= payroll - indirect labour

= 1,64,800$ - 29,400$

= 1,35,400 $

-----> Finished goods transferred calculation:

= Closing finished goods + cost of goods sold - opening finished goods

= 75,000$ + (7,93,000$ - 6,97,000$) - 64,000$

= 1,07,000 $

-----> Overheads applied calculation:

= Clsoing manufacturing overhead - Opening manufacturing overhead + overhad applied

= 4,34,000$ - 3,69,800$ + 2,400$

= 66,600$

-----> Disaster Loss calculation:

= Work in progress inventory (Opening) + Direct materials + Direct labour + Overheads applied - Finished goods transferred

= 1,72,400$ + 1,40,628$ + 1,35,400 $ + 66,600$ - 1,07,000 $

= 4,08,028$

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