FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Umair Company is a manufacturing of computers. Its controller resigned in October 2019. An inexperienced assistant accountant has prepared the following income statement for the month of October 2019.
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UMAIR COMPANY |
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Income statement |
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For the Month Ended October 31,2019 |
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Sales (net) |
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$390,00 |
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Less: Operating expenses |
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Raw materials purchases |
$ 132,000 |
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Direct labor cost |
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95,000 |
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Advertising expense |
45,000 |
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Selling and administrative salaries |
37,500 |
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Rent on factory facilities |
30,000 |
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22,500 |
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Depreciation on factory equipment |
15,500 |
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Indirect labor cost |
14,000 |
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Utilities expense |
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6,000 |
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insurance expense |
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4,000 |
401,500 |
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Net loss |
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-$11,500 |
Prior to October 2019 the company had been profitable every month. The company’s president is concerned about the accuracy of the income statement. As his friend, you have been asked to review the income statement and make necessary corrections. After examining other
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October 1 |
October 31 |
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Raw materials |
$ 9,000 |
$17,000 |
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Work in process |
8,000 |
7,000 |
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finished goods |
15,000 |
24,000 |
- Inventory balance at the beginning and end of October were:
- Only 30% of the utilities and 70% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities.
Instructions:
Prepare a schedule of the cost of goods manufactured for the October 2019.
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