Finney Displays designs and manufactures displays used in mobile devices. Serious flooding throughout the region affected Finney Displays' facilities. Inventory was completely ruined, and the company's computer system, including all accounting records, was destroyed.
Before the disaster recovery specialists clean the buildings, Heather Bailey, the company controller, is anxious to salvage whatever records she can to support an insurance claim for the destroyed inventory. She is standing in what is left of the Accounting Department with Tad Myers, the cost accountant.
"I didn't know mud could smell so bad," Tad says. "What should I be looking for?"
"Don't worry about beginning inventory numbers," responds Heather. "We'll get them from last year's annual report. We need first-quarter cost data."
"I was working on the first-quarter results just before the storm hit," Tad says. "Look, my report's still in my desk drawer. But all I can make out is that for the first quarter, direct material purchases were $524,000 and that direct labor, manufacturing overhead (other than indirect materials), and total manufacturing costs to account for were $545,000; $218,000; and $1,508,000, respectively. Wait, and cost of goods available for sale was $1,615,000."
"Great," says Heather. "I remember that sales for the period were approximately $1.6 million. Given our gross profit of 15%, that's all you should need."
Tad is not sure about that but decides to see what he can do with this information.
The beginning inventory numbers are as follows:
• Raw materials, $85,000
• Work in process, $187,000
• Finished goods, $209,000
He remembers several schedules he learned in college that may help him get started.
Requirement
Use exhibits in the chapter to determine the ending inventories of raw materials, work in process, and finished goods. Assume that the Raw Materials Inventory contains only direct materials.