Sage Hill Company is a manufacturer of smartphones. Its controller resigned in October 2022. An inexperienced assistant accountant has prepared the following income statement for the month of October 2022. Sage Hill Company Income Statement For the Month Ended October 31, 2022 Sales revenue $686,400 Less: Operating expenses Raw materials purchases $232,320 Direct labor cost 167,200 Advertising expense 79,200 Selling and administrative salaries 66,000 Rent on factory facilities 52,800 Depreciation on sales equipment 39,600 Depreciation on factory equipment 27,280 Indirect labor cost 24,640 Utilities expense 10,560 Insurance expense 7,040 706,640 Net loss $(20,240) Prior to October 2022, the company had been profitable every month. The company's 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 $15,840 $25,520 Work in process 17,600 12,320 Finished goods 26,400 44,000 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.