Seven-Eighths of Jim Whyte's Inventory Was Destroyed by Fire

question 24

Essay

Seven-eighths of Jim Whyte's inventory was destroyed by fire. He sold the remaining part, which was slightly damaged, for one-third of its value and received $1400.
a) What was the value of the destroyed part of the inventory?
b) What was the value of the inventory before the fire?

Calculate net operating income under both absorption and variable costing methods.

Compute unit product costs under absorption and variable costing.

Prepare income statements using both absorption and variable costing.

Reconcile absorption and variable costing net incomes.

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Definitions:

Hypothalamus

A region of the brain responsible for the regulation of certain metabolic processes and other activities of the autonomic nervous system, including hunger and temperature control.

Adrenal Glands

Small glands located on top of each kidney which produce various hormones including adrenaline and cortisol, involved in response to stress.

Visual Cliff

An experimental apparatus used to measure infants' perception of depth and their fear of falling.

Depth Perception

The ability to perceive the world in three dimensions and to judge the distance of objects.