Estimating costs from partial data Ima Planner built a manufacturing plant in High- Water Canyon just downstream from an earthen dam built in 1896. The company operated successfully at this location for several years, then heavy April rains caused the dam to break on May 1. All was lost in the ensuing flood. The insurance adjuster agrees with the company's claims for plant and equipment, but the company must estimate the cost of the inventory lost in the flood. Most of the inventory records were lost but the following information has been pieced together;

Factory overhead averages 35 percent of conversion cost. Material purchases for the four month period were $220,000. Prime costs average 80 percent of cost of goods manufactured. Gross margin on sales averages 25 percent. Cost of goods available for sale is estimated at $675,000. All raw materials are used as direct materials.

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Finished goods inventory, 1/1 Work in process inventory, 1/1 Raw materials inventory, 1/1 Sales 1/1 through 5/1 Direct labor cost $ 55,000 49,000 46,000 800,000 260,000