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					$ 780,000
Less:	Operating expenses
	Raw materials purchases		$ 264,000
	Direct labor cost		190,000
	Advertising expense		90,000
	Selling and administrative salaries		75,000
	Rent on factory facilities		60,000
	Depreciation on sales equipment		45,000
	Depreciation on factory equipment		31,000
	Indirect labor cost		28,000
	Utilities expense		12,000
	Insurance expense		8,000		803,000
Net loss					$( 23,000 )

Prior to October 2017, the company had been profitable every month. The companys 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		$ 18,000		$ 29,000
Work in process		20,000		14,000
Finished goods		30,000		50,000

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 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					$ 780,000
Less:	Operating expenses
	Raw materials purchases		$ 264,000
	Direct labor cost		190,000
	Advertising expense		90,000
	Selling and administrative salaries		75,000
	Rent on factory facilities		60,000
	Depreciation on sales equipment		45,000
	Depreciation on factory equipment		31,000
	Indirect labor cost		28,000
	Utilities expense		12,000
	Insurance expense		8,000		803,000
Net loss					$( 23,000 )

Prior to October 2017, the company had been profitable every month. The companys 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		$ 18,000		$ 29,000
Work in process		20,000		14,000
Finished goods		30,000		50,000

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.