PowerSwitch, Inc. designs and manufactures switches for telecommunications. Its facilities in North Carolina were flooded, destroying inventory and accounting records. The document provides financial information for PowerSwitch and calculates ending inventory balances after the flood by working through the accounting equations. It determines that the total book value of inventory lost was $532,000, consisting of $143,000 in raw materials, $239,000 in work-in-process inventory, and $150,000 in finished goods.

1. MANAGERIAL
ACCOUNTING
PRESENTED BY : SECTION C, GROUP 1
AAYUSH RAMCHANDANI
ANANYAK SAHA
DUSHYANT SHARMA
INTEKHAB ASLAM

2. Decision Case
 PowerSwitch, Inc.
 Designs and Manufactures switches used in
Telecommunications
 PowerSwitch’s facilities were affected by serious
flooding through out North Carolina
 Inventory and the accounting records were completely
destroyed.

3. DATA GIVEN:
Purchases of Materials ------------------------------------------------------------------------------ $476,000
Direct Labour Costs ---------------------------------------------------------------------------------- $505,000
Manufacturing Overhead costs -------------------------------------------------------------------- $245,000
Total Manufacturing Costs -------------------------------------------------------------------------- $1,425,000
Cost of Goods available for Sale ------------------------------------------------------------------- $1,340,000
Sales Revenue ------------------------------------------------------------------------------------------ $1,700,000
Gross Profit --------------------------------------------------------------------------------------------- 30%
Beginning Direct materials inventory ------------------------------------------------------------- $113,000
Beginning Work – In – Process inventory -------------------------------------------------------- $229,000
Beginning Finished goods inventory -------------------------------------------------------------- $154,000

4. 1) Ending Inventories of Direct Materials, WIP and Finished goods
Raw materials Inventory Work-In-Process Inventory Finished Goods Inventory
Beginning Direct materials
Inventory 113000 Beginning Directory 229000 Beginning Directory 154000
Purchases of Direct materials 476000 Direct Materials Used 446000
Cost of Goods
Manufactured
118600
0
Raw materials available for use 589000 Direct Labour 505000
Cost of Goods available for
sale
134000
0
Ending direct materials
inventory 143000
Manufacturing Overhead
Cost 245000
Ending Finished Goods
Inventory 150000
Direct Materials Used 446000 Total Manufacturing Costs 1425000 Cost of Goods Sold
119000
0
Ending Work-In-Process
inventory 239000
Cost of Goods Manufactured 1186000

5.  Direct Materials Used:
Beginning work in Process inventory + Direct Materials Used + Direct Labour + Manufacturing Overhead cost
= Total Manufacturing Costs
229,000 + Direct Materials Used + 505,000 +245,000 = 1,425,000
Direct Materials Used = $ 446,000
 Ending Raw Materials Inventory:
Raw Materials available – Ending Inventory = Direct Materials Used
$589,000 – Ending Raw Materials Inventory = $446,000
Ending Raw Materials Inventory = $143,000

6.  Cost of Goods Manufactured:
Beginning Finished Goods Inventory + Cost of Goods Manufactured = Cost of Goods Available for Sale
$154,000 + Cost of Goods Manufactured = $1,340,000
Cost of Goods Manufactured = $1,186,000
 Ending Work-in-Process Inventory:
Total Manufacturing Costs – Ending Work-in-Process Inventory = Cost of Goods Manufactured
$1,425,000 – Ending Work-in-Process Inventory = $1,186,000
Ending Work-in-Process Inventory = $ 239,000

7.  Cost of Goods Sold:
Sales * (100 – Gross Profit %) = Cost of Goods Sold
$1,700,000 * 70% = $1,190,000
Cost Of Goods Sold = 1,190,000
 Ending Finished Goods Inventory:
Cost of Goods Available for Sale – Ending Finished Goods Inventory = Cost of Goods Sold
$1,340,000 – Ending Finished Goods Inventory = $1,190,000
Ending Finished Goods Inventory = $ 150,000

8. 2) Itemize a list of the book value of inventory lost
Raw Materials Inventory 1,43,000
Work-in-Process Inventory 2,39,000
Finished Goods Inventory 1,50,000
Total Inventory 5,32,000

9. THANK YOU