Question

PLEASE COMPLETE THE INCOME STATEMENT & SCHEDULE OF COST OF GOODS MANUFACTURES [SHOW YOUR WORK]

Veekay Company was organized on November 1 of the previous year. After seven months of start-up losses, management had expected to earn a profit during June, the most recent month. Management was disappointed, however, when the income statement for June also showed a loss. June’s income statement follows:

VEEKAY COMPANY
Income Statement
For the Month Ended June 30
Sales				$	757,500
Less operating expenses:
Selling and administrative salaries	$	44,200
Rent on facilities		53,000
Purchases of raw materials		248,000
Insurance		11,300
Depreciation, sales equipment		12,950
Utilities costs		65,400
Indirect labour		129,400
Direct labour		108,100
Depreciation, factory equipment		15,600
Maintenance, factory		9,300
Advertising		95,800			793,050
Operating loss				$	(35,550	)

     After seeing the $35,550 loss for June, Veekay’s president stated, “I was sure we’d be profitable within six months, but after eight months we’re still spilling red ink. Maybe it’s time for us to throw in the towel. To make matters worse, I just heard that Debbie won’t be back from her surgery for at least six more weeks.”

     Debbie is the company’s controller; in her absence, the statement above was prepared by a new assistant who has had little experience in manufacturing operations. Additional information about the company follows:

1. Only 85% of the rent on facilities applies to factory operations; the remainder applies to selling and administrative activities.
2. Inventory balances at the beginning and end of June were as follows:

	June 1	June 30
Raw materials	$20,300	$51,850
Work in process	$78,950	$98,550
Finished goods	$23,560	$73,410

.

VEEKAY COMPANY Schedule of Cost of Goods Manufactured For the Month Ended June 30 Direct materials: 20,300 2$ Raw materials inventory, June 1 248,000 Add: Purchases of raw materials Raw materials available for use 268,300 Deduct: Raw materials inventory, June 30 51,850 Raw materials used in production 216,450 Direct labour 108,100 Manufacturing overhead: Indirect labour Utilities Insurance Maintenance, factory Rent on facilities Depreciation, factory equipment Total overhead costs Total manufacturing costs Add: Work in process inventory, June 1 324,550 324,550 Deduct: Work in process inventory, June 30 Cost of goods manufactured 324,550 %24 %24

Answer 1

Answer 1.

216,450 108,100 VEEKAY COMPANY Schedule of Cost of Goods Manufactured For the Month Ended June 30 Direct materials: Raw materials inventory, June 1 20,300 Add: Purchases of raw materials $ 248,000 Raw materials available for use $ 268,300 Deduct: Raw materials inventory, June 30 $ 51,850 Raw materials used in production Direct labor Manufacturing overhead: Indirect labor 129,400 Utilities 65,400 Insurance 11,300 Maintenance, factory 9,300 Rent on facilities 45,050 Depreciation, factory equipment 15,600 Total overhead costs Total manufacturing costs Add: Work in process inventory, June 1 $ $ $ $ $ $ 276,050 600,600 78,950 679,550 98,550 581,000 Deduct: Work in process inventory, June 30 Cost of goods manufactured

Answer 2.

757,500 VEEKAY COMPANY Income Statement For the Month Ended June 30 Sales Cost of goods sold: Finished goods inventory, June 1 Add: Cost of goods manufactured Goods available for sale Deduct: Finished goods inventory, June 30 $ Gross margin Selling and administrative expenses: Advertising Insurance Depreciation, sales equipment Rent on facilities Selling and administrative salaries Operating income 23,560 581,000 604,560 73,410 $ $ 531,150 226,350 95,800 11,300 12,950 7,950 44,200 $ $ 172,200 54,150