QUESTION THREE Schedule of Cost of Goods Manufactured; Income Statement Veakay.Company was organized on November 1 of the previous year. Afler 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. 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 $660,000 39,000 40,000 219,000 10,000 11,000 55,000 119,000 99,000 13,000 8,000 80,000 691,000 After seeing the $31,000 loss for June, Veakay’s president stated, 1 was sure we’d be profitable within six months, but after eight months we’re still spilling red ink. Maybe its 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 staterment 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: June 1June 30 Raw materials Work in process Finished goods $19,000 $46,000 $77,000 $94,000 $22,000 $76,000 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.