The following information relates to Walnut Ltd. for the year ended December 31, 2013:

Sales $3,500,000

Purchases:

Direct materials $700,000

Indirect materials $50,000

Office supplies $20,000

Salaries $500,000 *

Direct labour $800,000

Rent $100,000 *

Utilities $80,000 *

Advertising and promotional $30,000

Inventories: Dec. 31, 2012 Dec. 31, 2013

Direct materials $45,000 $62,000

Indirect materials ----- $ 9,000

Office supplies $1,000 -----

Work-in-process $4,100 $3,300

Finished goods $90,000 $81,700

*Of these costs, 80 % are assigned to manufacturing activities and the remainder pertain to selling and administrative functions.

(Assume that there is no "over-or-under" applied overhead.)

Instructions:

Prepare in good form a cost of goods manufactured schedule.
	Prepare an income statement through gross profit.

3. How much were the prime costs in 2013?
4. How much were the conversion costs in 2013?