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2017 EMPIRE COMPANY For the Month Ended October 31, 2017 $780,000 Sales Re $264,000 190,000 Direct labor costs 75,000 60,000 45,000 31,000 28,000 12,000 8,000 Rent on factory facilities on factory equipment Indirect labor cost Utiies expense $803,000 Net loss Prior to October 2017, the company had been profitable every month. The companys president is concerned about the accuracy of the income statement. As her friend, you have been asked to review the income statement make necessary corrections. After examining other manufacturing cost data, you have acquired additional Inventory balances at the beginning and end of October were nformation as follows Raw materials Work in process Finished goods October 1 October 31 $18,000 $29,000 20,000 30,000 14,000 50,000

to Cost of Goods Val Value Total raww Less: Raw alue Value Value Value Value Factory facility rent Indirect labor Factory utilities Total Total Total cost of work in process costs
Work in process, October 31 Less: Cost of goods manufactured re a correct income statement for (b) Prepar EMPIRE COMPANY Income Statement For the Month Ended October 31 Sales Revenue Cost of goods sold al Finished goods inventory, October 1 Cost of goods manufactured Cost of goods available for sale Less: Finished goods inventory, October 31 Value Valuo Cost of goods sold Gross proft Operating expenses Advertising expense Selling and administrative salaries Depreciation expense - sales equipment Insurance expense Value Value Value Utilities expense Total operating expenses Net income After you have completed P1-5A, consider the additional question Assume that utilities expense and insurance expense changed to $15,000 and $9,000 respectively. Also assume that 80% of utilities expense and 65% of insurance expense apply to factory operations. Show the impacto these changes on the cost of goods manufactured schedule and the income statement
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Answer #1

Summary:

Requirement 1:

a) The Cost of goods Manufactured = $581,800

b) Net Income = $2,000

Requirement 2:

a) The Cost of goods Manufactured = $585,850

b) Net Loss = ($2,000)

Requirement 1: EMPIRE COMPANY Cost of Goods Manufactured Schedule For the Month Ended October 31, 2017 Work in process inventory, Octoher 1 Direct materials Raw materials inventory, Octoher 1 Raw materials purchases Total raw materials available for use Less: Raw materials inventory, October 31 Direct materials used S18,000 2,64,000 2,82,000 29,000 $2,53,000 1,90,000 Direct labor Manufacturing overhead Factory facility rent Depreciation on factory equipment Indirect labor Factory utilities (12,000 X 75%) Factory insurance (8,000 X 60%) $60,000 31,000 28,000 9,000 4.800 Total manufacturing overhead 32,800 Total manufacturing costs 5,75,800 5,95,800 Total cost of work in process Less: Work in proccss, Uctober 3l Cost of goods manufactured EMPIRE COMPANY Income Statement For the Month Ended October 31, 2017 Sales Revenuc Cost of goods sold S7,80,000 Finished gods inventory, Octobcr $%30.000 Cost of goods manufactured Cost of goods available for sale Less: Finished goods inventory, October 50,000 Cost of goods sold 5,61,800 2,18,200 Gross proft Operating expenses Advertising expense Selling and administrative salarics Depreciation expense sales equipment 45,000 Insurance expense (8,000 X 40%) Utilities expense ( 1 2,000 X 25%) 90,000 75,000 3,200 3.000 2,16,200 S 2,000 Total operating expenses Net income Created by Universal Document Converterequirement 2: EMPIRE COMPANY Cost of Goods Manufactured Schedule For the Month Ended October 31, 2017 Work in process inventory, October 1 Direct materials $20,000 Raw materials inventory, October 1 Raw materials purchases Total raw materials available for use Less: Raw materials inventory, October 31 Direct materials used $18,000 2,64,000 2,82,000 29,000 $2,53,000 1,90,000 Direct labor Manufacturing overhead Factory facility rent Depreciation on factory equipment Indircct labor Factory utilities (15,000 X 80%) Factory insurance (9,000 X 65%) $60,000 31.000 28.000 12,000 5,850 Total manufacturing overhead 1.36,850 Total manufacturing costs Total cost of work in process Less: Work in process, October 31 Cost of goods manufactured 5,79,850 5,99,850 14,000 $ 5,85,850 Created by Universal Document ConverterEMPIRE COMPANY Income Statement For the Month Ended Octobcr 31, 2017 Sales Revenue Cost of goods sold $7,80,000 Finished goods inventory, October 1 Cost of goods manufactured Cost of goods available for sale Less: Finished goods inventory, October 31 $30,000 5,85,850 6,15,850 50,000 Cost of goods sold 5,65,850 2,14,150 Gross profit Operating expenses Advertising expense Selling and administrative salaries Depreciation expense - sales equipment Insurance expense (9,000 X 35%) Utilities expense (15,000 X 20%) 90,000 75,000 45.000 3,150 3,000 2,16,150 S(2,000) Total operating expenses Net income/(Loss) Created by Universal Document Converter

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