Question

EMPIRE COMPANY Income Statement For the Month Ended October 31, 2017 Sales revenue $780,000 Less: Operating expenses Raw materials purchases Direct labor cost Advertising expense Selling and administrative salaries Rent on factory facilities Depreciation on sales equipment Depreciation on factory equipment Indirect labor cost Utilities expense Insurance expense $264,000 190,000 90,000 75,000 60,000 45,000 31,000 28,000 12,000 8,000 803,000 Net loss $23,000 ) Prior to October 2017, the company had been profitable every month. The company's president is concerned about the accuracy of the income statement. As her friend, you have been you have acquired additional information as follows 1. Inventory balances at the beginning and end of October were: October 1 October 31 Raw materials Work in process Finished goods 2. Only 75% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities. $ 18,000 20,000 30,000 29,000 14,000 50,000

Answer 1

EMPIRE COMPANY
Income statement
For the month ended October 31, 2017
Sales Revenue		$ 7,80,000.00
Cost of Goods sold
Beginning Finished goods inventory	$            30,000.00
Cost of goods manufactured	$        5,81,800.00
Goods available for sale	$        6,11,800.00
Less: Ending Finished goods inventory	$            50,000.00
Cost of goods sold		$ 5,61,800.00
Gross Profit		$ 2,18,200.00
Operating expenses
Advertising Expense	$            90,000.00
Selling and Administrative salaries	$            75,000.00
Depreciation on sales equipment	$            45,000.00
Utilities	$              3,000.00
Insurance expense	$              3,200.00
Total Operating expense		$ 2,16,200.00
Net income (Loss)		$        2,000.00

Working note to get Cost of Goods manufactured

Cost of Goods Manufactured
For the month ended October 31, 2017
Beginning Work in process			$       20,000.00
Direct materials used
Raw material Inventory Beginning	$         18,000.00
Raw material Purchased	$      2,64,000.00
Raw material available for use	$      2,82,000.00
Less: Raw material Inventory Ending	$         29,000.00
Direct Material Used		$   2,53,000.00
Direct labor		$   1,90,000.00
Manufacturing Overheads
Rent on factory facilities	$         60,000.00
Depreciation on factory equipment	$         31,000.00
Indirect labor cost	$         28,000.00
Utilities expense	$            9,000.00
Insurance expense	$            4,800.00
Total Manufacturing Overheads		$   1,32,800.00
Total manufacturing cost incurred during the year			$    5,75,800.00
Total manufacturing cost to account for			$    5,95,800.00
Less: Ending WIP inventory			$       14,000.00
Cost of goods manufactured			$    5,81,800.00