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VEEKAY COMPANY 1 answer below » Ques 1:
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. June’s income statement follows. Document Preview: Ques 1:
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 View complete question » Ques 1:
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. June’s income statement follows. Document Preview: Ques 1:
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. June’s income statement follows.
VEEKAY COMPANY
Income Statement
For the Month Ended June 30
Sales
$
877,500
Less operating expenses:
Selling and administrative salaries
$
50,600
Rent on facilities
69,000
Purchases of raw materials
296,000
Insurance
12,900
Depreciation, sales equipment
15,350
Utilities costs
78,200
Indirect labour
142,200
Direct labour
119,300
Depreciation, factory equipment
18,800
Maintenance, factory
10,900
Advertising
105,400
918,650
Operating loss
$
(41,150)
After seeing the $41,150 loss for June, Veekay’s president stated, “I was sure we’d be profitable within six months, but after eight months we’re still spilling red ink. Maybe it’s 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 statement 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 1
June 30
Raw materials
$21,900
$59,050
Work in process
$81,350
$104,150
Finished goods
$25,480
$82,530
c.
Some 90% of the insurance and 80% of the utilities cost apply to factory operations; the remaining amounts… Attachments: Managerial-Ac….docx View less » Oct 31 2013 09:08 AM
