On 24 December after the close of business, a devastating fire at Solaris Pharmaceutical destroyed the firm's raw materials and finished goods inventories. The following information is available: $ Sales Revenue, 1 Jan to 24 Dec 1,980,000 Purchases, 1 Jan to 24 Dec 270,000 Direct Labour Cost, 1 Jan to 24 Dec 720,000 Costs of goods available for sale, 1 Jan to 24 Dec 1,500,000 Raw material inventory, 1 Jan Tim 60,000 333.000
On 24 December after the close of business, a devastating fire at Solaris Pharmaceutical destroyed the firm's raw materials and finished goods inventories. The following information is available: $ Sales Revenue, 1 Jan to 24 Dec 1,980,000 Purchases, 1 Jan to 24 Dec 270,000 Direct Labour Cost, 1 Jan to 24 Dec 720,000 Costs of goods available for sale, 1 Jan to 24 Dec 1,500,000 Raw material inventory, 1 Jan Tim 60,000 333.000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On 24 December after the close of business, a devastating fire at Solaris Pharmaceutical destroyed the firm's raw
materials and finished goods inventories. The following information is available:
$
Sales Revenue, 1 Jan to 24 Dec
1,980,000
Purchases, 1 Jan to 24 Dec
270,000
Direct Labour Cost, 1 Jan to 24 Dec
720,000
Costs of goods available for sale, 1 Jan to 24 Dec 1,500,000
Raw material inventory, 1 Jan
Finished goods inventory, 1 Jan
Gross profit margin
60,000
222,000
30%
The firm's accountant determines that the cost of direct materials used normally averages 25% of prime costs.
Solaris Pharmaceutical is in the process of negotiating a settlement with its insurance company. Compute an estimate on
the cost of the following that were destroyed by the fire:
(i) Raw material inventory.
(ii) Finished goods inventory.
Please post the steps required for the answers
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