Abu Luqman Company is a manufacturer of toys. Its controller resigned in August 2014. An inexperienced assistant accountant has prepared the following income statement for the month of August 2014.

Utilities expense ........................................................... 10,0

other manufacturing cost data, you have acquired additional information as follows. I. Inventory balances at the beginning and end of August were:

August 1 August 31

Raw materials ......................................... $19,500 ...................... $35,000

Work in process ...................................... 25,000 ........................ 21,000

Finished goods ......................................... 40,000 ........................ 52,000 ABU LUQMAN COMPANY

INCOME STATEMENT

FOR THE MONTH ENDED AUGUST 31, 2014

Sales revenue ....................................................................................... $675,000

Less: Operating expenses

Raw materials purchases .......................................... $220,000

Direct labor cost ......................................................... 160,000

Advertising expense ..................................................... 75,000

Selling and administrative salaries ............................... 70,000

Rent on factory facilities .............................................. 60,000

Depreciation on sales equipment ................................. 50,000

Depreciation on factory equipment .............................. 35,000

Indirect labor cost ......................................................... 20,000

00

Insurance expense .......................................................... 5,000 705,000

Net loss ............................................................................................... $ (30,000)

Prior to August 2014, the company had been profitable every month. The companys president is concerned about the accuracy of the income statement. As his friend, you have been asked to review the income statement and make necessary corrections. After examining

II. Only 60% of the utilities expense and 70% of the insurance expense apply to factory operations; the remaining amounts should be charged to selling and administrative activities.

INSTRUCTIONS

1. Prepare a cost of goods manufactured schedule for August 2014 according to the format taught in the class.