Basic Chemicals Ltd produces a highly flammable chemical product. The company experienced a flood on 1 April 2019 that destroyed its entire work in process inventory but did not affect the raw materials or finished goods inventories because they were located elsewhere. The insurance company wants to determine the cost of work in process inventory at the time of the flood. The company uses a periodic inventory system so perpetual records are not available.

A periodic inventory taken after the flood indicated that raw materials were valued at $89 200 and finished goods at $116 000. The company’s accounting records show that the inventories as at 1 January 2019 were as follows.

In the past, factory overhead costs have amounted to 350% of direct labour cost.
Sales for the first quarter of 2019 amounted to $600 000. The company’s gross profit has been 40% of sales for a long time.
Required

(a) Determine the following amounts:
i. the cost of sales for the first quarter of 2019 ii. the cost of goods manufactured for the first quarter of 2019 iii. the work in process inventory as at 31 March 2019, broken down into direct materials, direct labour and factory overhead.

Transcribed Image Text:

Raw materials Work in process Finished goods $ 29600 88 800 136800 In addition, the accounting records indicate that the costs recorded during the first quarter of 2019 amounted to: Purchase of raw materials Direct labour $160000 42 000