Case 1. Digiteck, Inc., designs and manufactures switches used in telecommunications. Digiteck's main facility is in California's Silicon Valley. Its second facility in North Carolina's Research Triangle Park services the Park's concentration of telecommunications firms. The serious flooding caused by Hurricane Floyd throughout North Carolina also affected Digiteck's 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, Annette Couch, 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 Jay Boros, the cost accountant. "I didn't know mud could smell so bad." Jay says, "What should I be looking for?" "Don't worry about beginning inventory numbers," responds Annette. "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 hurricane hit." Jay says. "Look, my report's still in my desk drawer. But all I can make out is that for the first quarter, mater- ial purchases were $434.000 and that direct labor, manufacturing overhead, and total manu- facturing costs to account for were $430,000, $245,000, and $1.300.000, respectively. Wait. and cost of goods available for sale was $1,280,000." "Great," says Annette. "I remember that sales for the period were approximately $1.5 million. Given our gross profit of 30%, that's all you should need." Jay is not sure about that, but decides to see what he can do with this information. The beginning inventory numbers are Direct materials, $109.000 Work in process, $215,000 Finished goods, $145,000 He remembers a schedule he learned in college that may help him get started. Required 1. Exhibit 19-13 resembles the schedule Jay has in mind. Use it to determine the ending inventories of direct materials, work in process, and finished goods. 2. Draft an insurance claim letter for the controller, seeking reimbursement for the flood damage to inventory. Digiteck's insurance representative is Don Snowball, at Industrial Insurance Co., 1122 Main Street, Hartford, CT 06268. The policy number is #3454340-23. Digiteck's address is 5 Research Triangle Way, Raleigh, NC 27698.