Problem 14-05A

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
Sales revenue					$793,600
Less:	Operating expenses
	Raw materials purchases		$264,900
	Direct labor cost		191,600
	Advertising expense		92,900
	Selling and administrative salaries		77,500
	Rent on factory facilities		61,400
	Depreciation on sales equipment		44,200
	Depreciation on factory equipment		32,400
	Indirect labor cost		29,600
	Utilities expense		11,200
	Insurance expense		8,200		813,900
Net loss					$(20,300)

Prior to October 2020, 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		$19,800		$35,900
Work in process		19,300		14,500
Finished goods		31,000		53,300

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.

Prepare a schedule of cost of goods manufactured for October 2020.

					$
		$
				$
Cost of Goods Manufactured Depreciation on Factory Equipment Direct Labor Direct Materials Direct Materials Used Factory Facility Rent Factory Insurance Factory Utilities Indirect Labor Manufacturing Overhead Raw Materials Inventory, October 1 Raw Materials Inventory, October 31 Raw Materials Purchases Total Cost of Work in Process Total Manufacturing Costs Total Manufacturing Overhead Total Raw Materials Available for Use Work in Process Inventory, October 1 Work in Process Inventory, October 31 Finished Goods Inventory, October 1 Finished Goods Inventory, October 31						$

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Prepare a correct income statement for October 2020.