Veekay Company was organized on November 1 of the previous year. After seven months of start-up losses, management had expected to earn a profit during June, 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 Less operating expenses: Selling and administrative salaries Rent on facilities Purchases of raw materials Insurance Depreciation, sales equipment Utilities costs Indirect labour Direct labour Depreciation, factory equipment Maintenance, factory Advertising Operating loss $ 44,200 53,000 248,000 11,300 $ 757,500 12,950 65,400 129,400 108,100 15,600 9,300 95,800 793,050 $ (35,550) After seeing the $35,550 loss for June, Veekay's president stated, "I was sure we'd be profitable 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 information 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: Raw materials Work in process Finished goods June 1 $20,300 June 30 $51,850 $78,950 $98,550 $23,560 $73,410 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. 1. As one step in gathering data for a recommendation to the president, prepare a schedule of cost of goods manufactured for June. Direct materials: VEEKAY COMPANY Schedule of Cost of Goods Manufactured For the Month Ended June 30 Manufacturing overhead: Total overhead costs Total manufacturing costs Cost of goods manufactured 0 $ 0 0 0 0 0 2. As a second step, prepare a new income statement for the month. Cost of goods sold: VEEKAY COMPANY Income Statement For the Month Ended June 30 Selling and administrative expenses: 0 0 0 $ 0