Empire Company is a manufacturer of smart phones. Its controller resigned in October 2020. An inexperienced assistant accountant has prepared the following income statement for the month of October 2020. EMPIRE COMPANY Income Statement For the Month Ended October 31, 2020 $793,400 Sales revenue Less: Operating expenses $264,400 Raw materials purchases Direct labor cost 189,800 Advertising expense 93,000 Selling and administrative salaries 78,000 Rent on factory facilities 61,800 46,000 Depreciation on sales equipment Depreciation on factory equipment 32,900 29,000 Indirect labor cost Utilities expense 12,400 8,100 815,400 Insurance expense $(22,000) Net loss Prior to October 2020, 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 31 October 1 $20,200 $35,500 Raw materials Work in process 14,800 19,800 Finished goods 31,000 53,100 2. Only 75% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities. EMPIRE COMPANY Cost of Goods Manufactured Schedule 2$