c. Only 60' of the rulon facilities applies to factory operations, the remainder applies to selling and The president has asked you to check over the income statement and make a recommendation about whether Swift Company was organized on March of the current year. After five months of Martup lo management had expected to earn a profit during August, the most recent month. Managemen disappointed, however, when the income statement for August also showed a loss. Augusts income Chapter 2 PROBLEM 2-6 statement follows: Preparing Financial Statements for a Manufacturer (405 - CC9, 10;L06 - CC11. 121 SWIFT COMPANY Ierome Statement For the Month Ended August 31 $530,000 Sales Less: Operating expenses Indirect labour cost Utilities Direct labour cost Depreciation, factory equipment Raw materials purchased Depreciation, sales equipment Insurance Rent on facilities Selling and administrative salaries Advertising Netlo $ 9,000 25,000 80,000 21.00 226,000 8,000 8.000 80.000 22.000 65,000 544000 $(14,000) The company's controller resigned a month ago. Sam, a new assistant in the controller's office, prepared the income statement above. Sam has had little experience in manufacturing operations. After seeing the $14,000 loss for August, Swift's president stated. "I was sure we'd be profitable within six months, but our six months are up and this loss for August is even worse than July's. I think it's time to start looking for someone to buy out the company's assets we don't, within a few months there won't be any assets to sell. By the way, I don't see any reason to look for a new controller. We'll just limp along with Sam for the time being." Additional information about the company follows: Approximately B0% of the utilities cost and 50% of the insurance apply to factory operations, The remaining amounts apply to selling and administrative activities h. Inventory balances at the beginning and end of August were as follows: Raw materials Work in process Finished goods August 1 $31.000 18.000 50,000 August 31 $78,000 10,000 55,000 administrative activities. company should look for a buyer for its assets. Required: 1. As one step in gathering data for a recommendation to the president, prepare a schedule of cost of goods manufactured in good form for August. 2. As a second step, prepare a new income statement for August. 3. On the basis of your statements prepared in Requirements (1) and (2), would you recommend that the company look for a buyer