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. Junes income statement follows:

VEEKAY COMPANY

Income Statement

For the Month Ended June 30

Sales

$

727,500

Less operating expenses:

Selling and administrative salaries

$

42,600

Rent on facilities

49,000

Purchases of raw materials

236,000

Insurance

10,900

Depreciation, sales equipment

12,350

Utilities costs

62,200

Indirect labour

126,200

Direct labour

105,300

Depreciation, factory equipment

14,800

Maintenance, factory

8,900

Advertising

93,400

761,650

Operating loss

$

(34,150

)

After seeing the $34,150 loss for June, Veekays president stated, I was sure wed be profitable within six months, but after eight months were still spilling red ink. Maybe its time for us to throw in the towel. To make matters worse, I just heard that Debbie wont be back from her surgery for at least six more weeks.

Debbie is the companys 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:

Only 85% of the rent on facilities applies to factory operations; the remainder applies to selling and administrative activities.

Inventory balances at the beginning and end of June were as follows:

	June 1	June 30
Raw materials	$19,900	$50,050
Work in process	$78,350	$97,150
Finished goods	$23,080	$71,130

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.