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Unformatted text preview: Sales 1,350,000 Gross Margin 30% Material Purchases 325,000 Direct Labor 220,000 Cost of Goods Available 1,020,000 Prime Cost 545,000 Manufacturing Overhead 65% Begin. Raw Material 41,000 Begin. WIP 56,000 Begin. Finished Goods 35,000 Cost of Goods Sold 945,000 (it is 70% as gross Margin is 30%) Prime Cost = Direct Material + Direct Labor Hence, Direct Material 325,000 Conversion Cost = Direct Labor + Manufacturing Overhead Then, Conversion Cost 628,571 Then, Manufacturing Overhead 408,571 Top Switch Inc. designs and manufactures switches used in telecommunications. Serious flooding throughout the state of Tennessee affected Top Switchâ€™s facilities. Inventory was completely ruined, and the companyâ€™s computer system, including all accounting records, was destroyed. Before the unfortunate incident, recovery spets cleaned the buildings. The company controller is very nervous and anxious to recover whatever records he can to support the insurance claim for the destroyed inventory. After consulting with the cost to recover whatever records he can to support the insurance claim for the destroyed inventory....
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- Spring '08
- Managerial Accounting, Supply chain management terms, Finished Goods