EXERCISE $1$Delta Mountain Supplies has been in business for three months. The company was formed by twooutdoor enthusiasts to produce high quality sleeping bags, which can used in all kinds of weatherconditions. 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 owners. 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 almost reached its productive capacity for producing sleeping bags and most of them had been sold. Still, 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 information and to report back to them.Exhibit OneDelta Mountain SuppliesIncome StatementFor the Quarter ended, September $30$thSales $(5,000$ sleeping bags$)$ $$720,000$Operating expenses: Selling and administrative salaries$$63,000$ Travel for sales purposes$45,000$ Advertising$98,000$ Indirect labour costs$100,000$ Raw materials purchased$220,000$ Plant supplies$5,000$ Direct labour cost$75,000$ Plant maintenance$38,000$ Depreciation, office equipment$13,000$ Rent $(90\%$ for the plant, $10\%$ for sales space$)50,000$ Insurance $($Plant only$)6,000$ Depreciation, Plant equipment$65,000$ Utilities $(80\%$ plant, $20\%$ for sales operations$)32,000$ Total operating expenses $810,000$Operating loss $$(90,000)$During the quarter, the company completed $7,000$ sleeping bags. The owners completed a physicalinventory count and valuation on September $30$th$.$ The opening and closing inventory values are as follows: July $1$stSeptember $30$thRaw materials inventory$$0$$$30,000$Work$-$in$-$process inventory$$0$$$24,000$Finished goods inventory$$0?$Required:$1.$ Describe two conceptual errors that the accountant made in preparing the income statementshown in exhibit one$2.$ Prepare a schedule of the cost of goods manufactured for the quarter ending September $30$th$\mathrm{.}3.$ Prepare a corrected income statement for the quarter.