BUSI 393 Study Guide - Finished Good, Income Statement, Direct Labor Cost
Document Summary
Roger powers, founder and president of windtech, inc. was dismayed when presented with the following report. Despite better-than-expected sales the first quarter, the company"s ability to remain a going concern was now in doubt based on the high cost of operations. His company was organized at the beginning of the current year to produce and market a revolutionary new storage battery that captures and stores electricity generated by wind power. In addition, on april 3, the company"s finished goods warehouse was destroyed by a fire and all 8,000 unsold batteries were destroyed. These batteries represented 20% of the first quarter"s production. Although the company"s insurance policy states that the company will be reimbursed for the cost of any finished batteries destroyed or stolen, the insurance adjuster is disputing the company"s claim of ,000. The company"s somewhat inexperienced accountant determined the amount of the claim as follows: Total costs for the quarter/batteries produced during the quarter = ,130,000/40,000 units = . 25/unit.
