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    Management Accounting for Virtual Accounting

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    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

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    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.