Prepare an estimate of the cost of work in process

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Reference no: EM131192026

On May 10, after the close of business, Fresno Furniture Company had a devastating fire that destroyed the company's work-in-process and finished-goods inventories. Fortunately, all raw materials escaped damage because materials owned by the firm were stored in another warehouse. The following informa- tion is available:

Sales revenue through May 10....
Income before losses through May 10....
Direct labour through May 10....
Cost of goods available for sale, May 10...
Work-in-progress inventory, January 1

Fresno Furniture Company's accountants determined that the cost of direct materials used normally averages 25 percent of prime costs (i.e., direct material + direct labor). In addition, manufacturing overhead is 50 percent of the firm's total production costs. The gross margin is 30 percent of sales.

Required:

The company is in the process of negotiating a settlement with its insurance company. Prepare an estimate of the cost of work-in-process and finished-goods inventories that were destroyed by the fire.

Reference no: EM131192026

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