EMPIRE COMPANY Income Statement For the Month Ended October 31, 2017 October 1 O

Question

EMPIRE COMPANY
Income Statement
For the Month Ended October 31, 2017

October 1

October 31

(a)

Prepare a schedule of cost of goods manufactured for October 2017. (Round answers to 0 decimal places, e.g. 125.)

Empire Company is a manufacturer of smart phones. Its controller resigned in October 2017. An inexperienced assistant accountant has prepared the following income statement for the month of October 2017.

EMPIRE COMPANY
Income Statement
For the Month Ended October 31, 2017

Sales revenue $794,100 Less: Operating expenses Raw materials purchases $264,800 Direct labor cost 188,800 Advertising expense 92,100 Selling and administrative salaries 76,400 Rent on factory facilities 62,900 Depreciation on sales equipment 45,800 Depreciation on factory equipment 32,900 Indirect labor cost 29,100 Utilities expense 12,900 Insurance expense 8,300 814,000 Net loss $(19,900)
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 asked to review the income statement and make necessary corrections. After examining other manufacturing cost data, you have acquired additional information as follows.

1. Inventory balances at the beginning and end of October were:

October 1

October 31

Raw materials $20,300 $35,300 Work in process 19,800 14,700 Finished goods 30,800 53,200
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.

Explanation / Answer

Answer:

Schedule of cost of goods manufactured for October 2017

Work in process, October 1 $   19,800.00 Direct materials Raw materials inventory, October 1 $   20,300.00 Raw materials purchases $ 264,800.00 Total raw materials available for use $ 285,100.00 Less: Raw materials inventory, 31-Oct $   35,300.00 Direct materials used $ 249,800.00 Direct labor $ 188,800.00 Manufacturing overhead Factory facility rent $   62,900.00 Depreciation on factory equipment $   32,900.00 Indirect labor $   29,100.00 Factory utilities (12, 900 x 75%) $     9,675.00 Factory insurance (8,300 x 60%) $     4,980.00 Total manufacturing overhead $ 139,555.00 Total manufacturing costs $ 578,155.00 Total cost of work in process $ 597,955.00 Less: Work in process, October 31 $   14,700.00 Cost of goods manufactured $ 583,255.00

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