Inventory Control for Cumberland Metals
SECTION I: BACKGROUND AND HISTORY OF THE PROBLEM
In the event of a fire, a company must be able to account for and document its last known level of material on hand, work in progress and the amount of finished goods on hand at the time of the fire in order to file an insurance claim. If not, the company would stand to lose large amounts of inventory and assets that are invested in these goods.
Due to a recent accidental fire, Cumberland Metals Company has lost not only its entire manufacturing plant but also its entire administrative office and records department. Fortunately for the company, when the fire broke out certain employees were able to take with them important financial documentation that could be used to recalculate the company's last standing levels of inventory. When the fire broke out, these employees fled the building as fast as possible while at the same time carrying with them the last items that they were working on. The following list of information has been salvaged from the fire of Cumberland Metals Corporation:
? Direct labor costs for this year totals $180,000
? New raw material purchases total $290,000
? Sales to date total $1,200,000
? Gross margin rate for the company is 40% of sales
? Goods available for sale to customers totals $810,000 at cost
? Prime cost for the company is $410,000
? Manufacturing overhead is 70% of conversion cost
? Beginning raw materials for the year were $18,000
? Beginning work in progress for the year was $65,000
? Beginning finished g ...