Telecom Switches designs and manufactures switches used in telecommunications. Serious flooding in Houston affected Telecom Switches facilities. Inventory was completely ruined and the companys computer system, including its accounting records, were destroyed. [What internal control procedure did they ignore?]

Before the disaster recovery specialists from CleanPro Cleaning and Restoration (a real company owned by a Loyola accounting alum, Parrish Orth) start work, Telecom Switches controller, Vero Sanchez, is desperate 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 Brendan Pedrayes, the new cost accountant.

Ugh, I did not know mud could smell so bad, says Brendan. What should I be looking for? Dont worry about beginning inventory numbers, responds Ms. Sanchez, Well get them from last years annual report. We need the first quarter cost data. I was working on the first quarters result just before the storm hit, Brendan says. Look, my report is still in my desk drawer! But all I can make out is that for the first quarter, materials purchases were $476,000, and that direct labor, manufacturing overhead (other than indirect materials), and total manufacturing costs to account for totaled $505,000, $245,000, and $1,425,000, respectively. Oh, and it looks like cost of goods available for sale was $1,340,000! Great, says Ms. Sanchez, I remember that sales for the quarter were about $1.7 million. Since our gross profit historically is 30%, thats all you should need. Brendan is not so sure, but he remembers learning something helpful in cost class

The annual report states that beginning inventory numbers were:

Raw materials $113,000

Work-in-process $229,000

Finished goods $154,000

So, you (as Brendan) must determine ending inventories of raw materials, work-in-process, and finished goods (These would be what was destroyed by flood). Provide labelled work in a nice table that your boss could give to the insurance company to support your claim for losses. Be sure you show your boss (Ms. Sanchez and me by extension) supporting labelled calculations.