Ques 2-22 which is attached belowQues 2-22 which is

PROBLEM 222 Schedule of Cost of Goods Manufactured: Income Statement [L0 1. L02. L03. L04] Veekay Company was organized on November 1 of the previous year. After seven months of start-up losses, management had expected to earn a prot during lune. the most recent month. Management was disappointed. however. when the income statement for June also showed a loss. June's income statement follows: VEEKAY COMPANY Income Statement For the Month Ended June 30 Sales ............................................ $660,000 Less operating expenses: Selling and administrative salaries ...................... 3 39,000 Rent on facilities ...................................... 10,000 Purchases of raw materials ............................ 209,000 Insuranoe ............................................. 10,000 Depreciation. sales equipment ......................... 11,000 Utilities costs .......................................... 55,000 Indirect labour ......................................... 119,000 Direct labour .......................................... 99,000 Depreciation. factory equipment ....................... 13,000 Maintenance. factory .................................. 3000 Advertising ............................................ 33.000 691.000 Operating loss ............................................ $ 5 31.000} After seeing the $31,000 loss for June. Veekay's president stated. \"I was sure wed be prot- able within six months. but after eight months we're still spilling red ink. Maybe it's time for us to throw in the towel. To make matters worse. I just heard that Debbie won't be back from her surgery for at least six more weeks." Debbie is the company's controller: in her absence. the statement above was prepared by a new assistant who has had little experience in manufacturing operations. Additional informa- tion about the company follows: a. Only 85% of the rent on facilities applies to factory operations: the remainder applies to selling and administrative activities. b. Inventory balances at the beginning and end of June were as follows: June 1 June so Raw materials ................................. $19,000 $46,000 Work in process ............................... H.000 94,000 Finished goods ................................ 22,000 66,000 c. Some 90% of the insurance and 80% of the utilities cost apply to factory operations; the remaining amounts apply to selling and administrative activities. The president has asked you to check over the above income statement and recommend whether the company should continue operations. Required: 1. As one step in gathering data for a recommendation to the president. prepare a schedule of cost of goods manufactured for June. 2. As a second step, prepare a new income statement for the month. 3. Based on your statements prepared in (1) and (2) above, would you recommend that the company continue operations