Hint: If gross profit margin rate is 40% of sales, then cost of goods sold is 60% of sales

NAME __________________________________________

PRINCIPLES II - FINAL PROJECT 100 POINTS

On June 12, while snoozing at the controls of his private airplane, R. U. Shure leaned heavily against the door; suddenly, the door opened accidentally and he tumbled out of the airplane. Fortunately, he had on a parachute and landed safely. However, as he parachuted to the ground, he watched helplessly as the empty plane smashed into his companys plant and administrative offices. The good news was that it was a Saturday, so the only employees in the building were a couple of company officers, the Operations Manager and the Controller, both of whom got out safely. The bad news was that the ensuing fire burned the building to the ground and destroyed all of the companys records.

The officers worried how they could file an insurance claim with no records. After talking together and looking at amounts on the papers that they had in their briefcases and amounts that they remembered, the officers realized that they could piece together enough information to file an insurance claim. All they needed to determine was the amount of cost in the companys inventories as of the date of the accident.

The Operations Manager had a copy of last years annual report, which showed that raw materials at the beginning of this year (January 1) totaled $30,000, work in process totaled $50,000, and finished goods totaled $90,000. He could also determine from the annual report that the gross profit margin rate has consistently been 40% of sales for years, and that the direct labor cost is 25% of the manufacturing overhead cost. In addition, he remembered that the Purchasing Manager told him yesterday in a meeting that the raw materials purchased year-to-date was $420,000.

The Controller had a summary page that showed sales year-to-date has totaled $1,350,000 and that manufacturing overhead cost year-to-date has totaled $520,000. The summary sheet also lists the sum of direct labor and direct materials year-to-date has totaled $510,000 and that goods available for sale this year has totaled $960,000.

They joyfully realized that they can have the insurance claim ready to file by the end of the day!

To file an insurance claim, you must determine the cost of the raw materials, work in process, and finished goods inventories as of the date of the accident. You may assume that all of the materials used in production during the year were direct materials. (Hint: Using the given amounts, work with the various formulas and schedules learned in class.) You MUST show your calculations and clearly label all amounts in your calculations. Clearly indicate your final amounts for the cost of the raw materials, work in process, and finished goods inventories as of the date of the accident.

June 12^th Raw Materials Inventory __________________

June 12^th Work-in-Process Inventory __________________

June 12^th Finished Goods Inventory __________________