Assignment on Cost Terms and Classifications Delta Mountain Supplies has been in bus iness for three months. The company was formed by two outdoor enthusiasts to produce high quality sleeping bags, which can used in all kinds ofwe ather conditions. The owners of the company were well skilled in production and had developed an excellent relationship with a boutique store that specializes in selling outdoor equipment. The administration work and the accounting have been managed by the brother of one of the owner's. The brother had a business degree but no special training in accounting. The owners had just received the income statement for the latest quarter and were somewhat dismayed by the results. The company had al Imost reached its productive capadity for producing slee ping bags and most of them had been sold. Stil, the income statement, presented in exhibit one, showed an operating loss for the quarter. Believing something was not correct, the owners have hired you to review the accounting info tion and to report back to them. Exhibit One Delta Mountain Supplies Income Statement For the Quarter ended, September 30 Sales (5,000 sleeping bags) $720,000 Operating expenses: Selling and administrative salla ries Travel for sales purposes Advertising Indirect labour costs $63,000 45,000 98,000 100,000 Raw materials purchased Plant supplies Direct labour cost 220,000 5,000 75,000 Plant maintenance 38,000 Depreciation, office equipment Rent (90% for the plant, 10 % for sales space) Insurance (Plant only) Deprediation, Plant equipment Utilities (80% plant, 20% for sales operations) Total operating expenses Operating loss 13,000 50,000 6,000 65,000 32,000 810.000 S(90,000) During the quarter, the company completed 7,000 sleeping bags. The owners completed a physical inventory count and valuation on September 30th. The opening and closing inventory values are as follows: July 1st $0 $0 $0 September 30th $30,000 $24,000 Raw materials inventory Work-in-process inventory Finished goods inventory ? Prepare a corrected income statement for the quarter. 3