1. The company’s sales for thefirst 18 days of December amounted to $460,000. No

Question

1.     The company’s sales for thefirst 18 days of December amounted to $460,000. Normally, thisproduct line generates a gross profit equal to 40 percent ofsales.

2.     Finished Goods Inventory was $58,000on December 1 and $85,000 on December 18.

3.     On December 1, Work in ProcessInventory was $96,000.

4.     During the first 18 days of December,the company incurred the following costs:

Manufacturingoverhead                     84,000

Determine the value of Work in Process Inventory that wasdestroyed by the fire.

Explanation / Answer

Sales for 18 days inDecember                                                               $460,000 Add : Increase in Finished Goods Inventory            (85,000-58,000)                                                                        $27,000                                                                                                             ------------                                                                                                               $487,000 Less: Total cost plus openingWIP              ($152,000+$88,000+$84,000+96,000)            $420,000 Less: Gross profit @ 40% on Sales i.e.$460,000         $184,000                                                                                     ----------          $604,000                                                                                                                -------------          Value ofWIP  inventory destroyed byfire                                      $117,000                                                                                                             =========

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