eekay Company was organized on November 1 of the previous year. After seven mont
ID: 2342629 • Letter: E
Question
eekay 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 Insuranc Depreciation, sales equipment Utilities costs Indirect labour Direct labour Depreciation, factory equipment Maintenance, factory Advertising 46,200 58,000 263,000 11,800 13,700 69,400 133,400 111,600 16,608 9,800 98,800 832,300 $ (37,300) Operating lossExplanation / Answer
Solution:-
1. As one step in gathering data for a recommendation to the president prepare a schedule of cost of goods manufactured for june:-
$263,000
= 20,000 + 263,000
= $283,000
= 283,000 - 54,100
= $228,900
= 85% * 58,000
= $49,300
= 90% * 11,800
= $10,620
= 80% * 69,400
= $55,520
= 49,300 + 10,620 + 55,520 + 133,400 + 9,800 + 166,600
= $275,240
= 275,240 + 111,600 + 228,000
= $614,840
= 614,840 + 79,700
= $694,540
= 694,540 - 100,300
= $594,240
2. As a second step.Prepare a new income statement for the month:-
$594,240
= 24,160 + 594,240
= $618,400
= 618,400 - 76,260
= $542,140
= 795,000 - 542,140
= $252,860
15% * 58,000
= $8,700
= 10% * 11,800
= $1,180
20 % * 69,400
= $13,880
= 98,800 + 13,880 + 1,180 + 13,700 +8,700 + 46,200
= $182,460
= 252,860 - 182,460
= $70,400
VEEKAY COMPANY Schedule of cost of goods manufactured For the month ended June 30 Direct materials:- Raw materials inventory, June 1 $20,000 Plus: Purchases of raw materials$263,000
Raw materials available for use= 20,000 + 263,000
= $283,000
Less:Raw materials inventory ,June 30 $54,100 Raw materials used in production= 283,000 - 54,100
= $228,900
Direct labour $111,600 Manufacturing overhead :- Rent on facilities= 85% * 58,000
= $49,300
Insurance= 90% * 11,800
= $10,620
Utilities= 80% * 69,400
= $55,520
Indirect labour $133,400 Maintenance, factory $9,800 Depreciation , factory equipment $16,600 Total overhead costs= 49,300 + 10,620 + 55,520 + 133,400 + 9,800 + 166,600
= $275,240
Total manufacturing costs= 275,240 + 111,600 + 228,000
= $614,840
Plus: work in process inventory, June 1 $79,700= 614,840 + 79,700
= $694,540
Less:Work in process inventory ,June 30 $100,300 Cost of goods manufactured= 694,540 - 100,300
= $594,240
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