Estimation of Flood Loss
Response to the following problem:
On June 30, 2010, a flash flood damaged the warehouse and factory of Padway Corporation, completely destroying the work-in-process inventory. There was no damage to either the raw materials or finished goods inventories. A physical inventory taken after the flood revealed the following valuations:
|
Raw materials
|
$ 62,000
|
|
Work in process
|
-0-
|
|
Finished goods
|
119,000
|
The inventory on January 1. 2010 consisted of the following:
|
Raw materials
|
$ 30,000
|
|
Work in process
|
100,000
|
|
Finished goods
|
140,000
|
|
|
$270,000
|
A review of the books and records disclosed that the gross profit margin historically approximated 25% of sales. The sales for the first six months of 2010 were $340,000. Raw material purchases were $115,000. Direct labor costs for this period were $80,000, and manufacturing overhead was historically applied at 50% of direct labor.
Required
Compute the value of the work-in-process inventory lost at June 30, 2010. Show supporting computations in good form.