Reference no: EM132651374

Question - Arco Chemicals ltd produces a highly flammable chemical product. The company experienced a flood on 01April 2016 that detroyed 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. A periodic inventory taken after the flood indicated the 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 2016 were;

Raw materials $29,600

Work in process $88,800

Finished goods $136,800

In addition, the accounting records indicate that the costs recorded during the first quarter of 2016 amounted to:

Purchase of raw materials $160,000

Direct labor 42,000

In the past, factory overhead costs have amounted to 350% of direct labor cost. Sales for the first quarter of 2016 amounted to $600,000. The company's gross profit has been 40% of sales for a long time.

Required -

1. Determine the cost of goods manufactured for the first quarter of 2016.

2. Determine the cost of sales for the first quarter of 2016.

3. Determine the work in process inventory as at 31 March 2016.