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Management Accounting for Virtual Accounting

Monet Creations Ltd. suffered a fire that destroyed virtually the entire inventory on hand in the warehouse. The fire had also spread to the administration building where much of the accounting records were destroyed. The only information that could be pieced together from some of the computer files follows:

Cost of Goods Sold $33,000
Direct materials purchases for the year 8,000
Total manufacturing overhead 13,000
Sales commissions 2,000
Direct labor 8,000
Direct materials used 3,600
Finished goods inventory, beginning 7,800
Gross profit 12,000
Work in process, beginning 1,300
Work in process, ending 300

Based on this information what was the ending finished goods inventory balance at the time of
the fire?

a. $400
b. $700
c. $2,400
d. $4,800
e. $15,200

Solution Preview

Dear student,
The correct answer is (a) $400
Complete solution is provided in a separate excel file to enable you to understand how to calculate Finished Goods inventory from the cost data available. The solution contains following parts with point to point explanation and extra explanatory notes on conceptual part.

A Manufacturing Overhead:$13000

B Cost Of Goods Manufactured: $25600

C Cost Of Goods Sold $ 33000

Ending Finished goods inventory $400

Note: 1 Ending inventory is missing in this problem.It is calculated by deducting ...

Solution Summary

The expert examines management accounting for virtual inventory.