On June 30, 2011, a tornado damaged Jensen Corporation's warehouse and factor completely destroying the work-in-process inventory. Neither the raw materials nor finished goods inventories were damaged. A physical inventory taken after the tornado revealed the following values:
Raw materials $87,000
Finished goods $151,000
The inventory of January 1, 2011, consisted of the following:
Raw materials $41,000
Finished goods $173,000
A review of the books and records disclosed that the gross profit margin historically approximated 28% of sales. The sales total for the first six months of 2011 was $405,000. Raw material purchases totaled $150,000. Direct labor costs for this period were $112,000, and manufacturing overhead has historically been applied at 50% of direct labor.
Compute the value of the work-in-process inventory lost at June 30, 2011. Show supporting computations.
Here is the answer:
less:gross margin 113400
cost of sales 291600
less:opening finished goods 173000
The expert computes the work-in-process inventory from balance sheets.