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Question Details:
Question
ICI Ltd produced soda ash. That product uses in different industries. The property of this
product is highly inflammable. The position of inventory at the beginning of year 2007 is as
follows:
Inventories at Jan 1, 2007 consisted of:
Particulars Rs
Finished goods 8,000
Work-In-Process 6,000
Materials 1,200
Total 15,200
A fire broke out in a factory at July 31, 2007 destroying all Work-in-Process inventories.
After the fire, the inventories were valued as follows:
Particulars Rs
Materials 4,000
Finished goods 7,000
In 2007 the amount of Gross profit is based on average GP to Sale ratio of last 5 years 2002
to onward 2006. An analysis of past financial statements reflected as follows:
Years Sales Gross Profit
Rs. Rs.
2002 40,000 11,555
2003 45,000 11,132
2004 50,000 13,452
2005 52,000 12,897
2006 60,000 17,654
Data for 7 months to 2007 is given as follows:
Particulars Rs.
Sales 20,000
Material Purchases 5,600
Direct Labor 6,000
FOH 3,000
Required: Calculate the Value of Work-In-Process destroyed by fire in 2007
Calculate the Value Gross Profit in 2007 .
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