Inventory Loss—Gross Profit Method
On June 30, 2008, a flash flood damaged the warehouse and factory of Dr. ybed 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:
|
Finished goods |
$105,000 |
|
Work in process. |
0 |
|
Raw materials. |
51,500 |
The inventory on January 1, 2008, consisted of the following:
|
Finished goods |
$118,000 |
|
Work in process |
111,000 |
|
Raw materials |
54,000 |
|
|
$283,000 |
A review of the books and records disclosed that the gross profit margin historically approximated 36% of sales. The sales for the first six months of 2008 were $496,000. Raw materials purchases were $87,000. Direct labor costs for this period were $120,000, and manufacturing overhead has historically been applied at 60% of direct labor. Compute the value of the work in process inventory lost on June 30, 2008.