A distraught employee, Fang W. Arson, put a torch to amanufacturing plant on a blustery February 26. The resulting blazedestroyed the plant and its contents. Fortunately, certainaccounting records were kept in another building. They reveal thefollowing for the period from January 1, 2011 to February 26, 2011:Direct materials purchased $160,000, Work-in-process inventory,1/1/2011 $34,000 Direct materials inventory, 1/1/2011 $16,000Finished goods inventory, 1/1/2011 $30,000 Manufacturing overheadcosts 40% of conversion costs, Revenues $500,000, DL $180,000,Prime cost $294,000, Gross margin percentage base on revenues 20%,Cost of goods available for sale $450,000. The loss is fullycovered by insurance. The insurance company wants to know thehistorical cost of the inventories as a basis for negotiating asettlement, although the settlement is actually is actually to bebased on replacement cost, not historical cost. Calculate the costof: 1. Finished goods inventory, 2/26,2009 2. Work in processinventory, 2/26/2009 3. Direct materials inventory, 2/26/2009 Thisquestion has already been answered but I am unsure about howoverhead and cost of goods sold was calculated. Here is thecalculation for overhead: ($180,000/60)x40 â Where did the 60 and40 come from? Here is the calculation for COGS: $500,000x80% -Where did the 80% come from?
A distraught employee, Fang W. Arson, put a torch to amanufacturing plant on a blustery February 26. The resulting blazedestroyed the plant and its contents. Fortunately, certainaccounting records were kept in another building. They reveal thefollowing for the period from January 1, 2011 to February 26, 2011:Direct materials purchased $160,000, Work-in-process inventory,1/1/2011 $34,000 Direct materials inventory, 1/1/2011 $16,000Finished goods inventory, 1/1/2011 $30,000 Manufacturing overheadcosts 40% of conversion costs, Revenues $500,000, DL $180,000,Prime cost $294,000, Gross margin percentage base on revenues 20%,Cost of goods available for sale $450,000. The loss is fullycovered by insurance. The insurance company wants to know thehistorical cost of the inventories as a basis for negotiating asettlement, although the settlement is actually is actually to bebased on replacement cost, not historical cost. Calculate the costof: 1. Finished goods inventory, 2/26,2009 2. Work in processinventory, 2/26/2009 3. Direct materials inventory, 2/26/2009 Thisquestion has already been answered but I am unsure about howoverhead and cost of goods sold was calculated. Here is thecalculation for overhead: ($180,000/60)x40 â Where did the 60 and40 come from? Here is the calculation for COGS: $500,000x80% -Where did the 80% come from?
