Question

Empire Company is a mอnufacturer af smart phones. Its oortroler resigned in October 2017. An inexperienced อ:2start accountant has prepared the following income statement for the month cf October 2017 Statement For the Month Lnded October 31, 2U17 80,000 Less: Operating expenses Raw materials purchases Advertising epes Rent n tactory taciities 3 264,000 xiities axpansa st lnss iar to nctnher 20 17 tha ( m an had been n ortah!ค 숟w γ month T rou have acquired additienal informatian as folkows enmpany prasident R rnnoemed a at the accuracy of t ด ncam" statement. Ae artris d nu have been ksked o iew thaincane statemen and makg nack can caractions. Atter amining a her marutat unna rest d Inventory balances at the beginning and end of October were Ran materials Work in process irished oods 2·Orly /5⅔じf the utilities experse and oc1% uf the i surance expense apply to factory opersuuns. Ihe rernaring smounts should be charged to seling and admiristrative activities. 18,000 S 29,00

Answer 1

Cost of goods manufactured is the amount of cost incurred by the company to manufacture the goods. These cost mainly includes direct and factory costs
Below is the schedule to calculate cost of goods manufactured
EMPIRE COMPANY
Cost of Goods Manufactured Schedule
For the Month Ended October 31, 2017
Beginning work in process, October 1			$20,000
Direct materials used
Beginning raw material inventory, October 1	$18,000
Raw material purchases	$264,000
Total raw materials available	$282,000
Less : Ending raw material inventory, October 31	$29,000
Total raw materials used		$253,000
Direct Labor		$190,000
Manufacturing overhead costs
Rent on factory facilities	$60,000
Depreciation on factory equipment	$31,000
Indirect Labor cost	$28,000
Factory Utilities (12,000*75%)	$9,000
Factory Insurance (8,000*60%)	$4,800
Total manufacturing overhead		$132,800
Total manufacturing costs			$575,800
Total cost of work in process			$595,800
Less : Ending work in process, October 31			$14,000
Cost of Goods Manufactured			$581,800
The corrected income statement for October 31 is shown below
EMPIRE COMPANY
Cost of Goods Manufactured Schedule
For the Month Ended October 31, 2017
Sales revenue		$780,000
Cost of goods sold
Finished goods inventory, October 1	$30,000
Cost of goods manufactured	$581,800
Cost of goods available for sale	$611,800
Less : Finished goods inventory, October 31	$50,000	$561,800
Gross Profit		$218,200
Operating expenses
Advertising expense	$90,000
Selling and administrative salaries	$75,000
Depreciation on sales equipment	$45,000
Insurance expense (8000*40%)	$3,200
Utilities expense (12000*25%)	$3,000
Total operating expenses		$216,200
Net Income		$2,000
This gives company a profit of $2,000 from a loss of $23,000