Q. No. 5. Proprietor (Owner) of ABC Industries has limited knowledge of Cost & Managerial Accounting who prepared Income Statement for his business for the year ended on December 31, 2016 that is given as under: (Rs.) (Rs.) Sales 675000 Less: Expenses Direct Labour 137500 Indirect Labour 18000 Selling & Administrative Salaries 48000 Raw materials purchased 248500 Electricity bill 22500 Insurance expired 6000 Depreciation of factory equipments 33000 Depreciation of sales equipments 4500 Rent of Premises 75000 Advertising 81500 674500 Net Profit 500 The Owner has some doubts about the accuracy of the above statement and has requested you (as Professional Accountant) to check over the statement and make necessary corrections based upon following additional information. (i) 80% of the electricity bill, 75% of insurance expired and 70% of Rent of Premises associated to Factory operations and the remaining amounts are applicable to Selling and Administrative activities. (ii) (111) Beginning Inventory (January 1, 2016) and Ending Inventory (December 31, 2016) in Rs. were: Finished Goods 50000 60000 Work in Progress 42500 30000 Raw Material 7500 18000 Factory overhead is applied @ Rs. 5 per machine hour. The total machine hours are 26400 during the year. Factory overhead variance is charged to cost of goods sold, finished goods and work in process ending inventories. Required: (a) Prepare cost of goods manufactured and cost of goods sold statement indicating cost of goods sold at normal and at actual. (b) Prepare revised income statement (C) Explain the reason for difference between net profit as per Owner's Income statement and revised statement (prepared by you)