3 Swift Company was organized on March 1 of the current year. After five months of startup losses, management had expect

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3 Swift Company was organized on March 1 of the current year. After five months of startup losses, management had expected to earn a profit during August, the most recent month. Management was disappointed, however, when the income statement for August also showed a loss. August's income statement follows: its 02:26:20 eBook SWIFT COMPANY Income Statement For the Month Ended August 31 Sales Less: Operating expenses: Indirect labour cost Utilities Direct labour cost Depreciation, factory equipment Raw materials purchased i Depreciation, sales equipment Insurance Rent on facilities. Selling and administrative salaries Advertising Net loss. $ 14,400 16,000 62,000 23,000 189,000 18,000 3,400 47,000 40,000 86,700 $490,000 499,500 $ (9,500) The company's controller resigned a month ago. Sam, a new assistant in the controller's office, prepared the income statement above. Sam has had little experience in manufacturing operations. After seeing the $9,500 loss for August, Swift's president stated, "I was sure we'd be profitable within six months, but our six months are up and this loss for August is even worse than July's. I think it's time to start looking for someone to buy out the company's assets-if we don't, within a few months there won't be any assets to sell. By the way, I don't see any reason to look for a new controller. We'll just limp along with Sam for the time being." Additional information about the company follows: a. Approximately 70% of the utilities cost and 70% of the insurance apply to factory operations. The remaining amounts apply to selling and administrative activities. b. Inventory balances at the beginning and end of August were as follows:
HRPD 703 Mid-term Section 001 3 20 points 02:25:56 eBook ng m www b. Inventory balances at the beginning and end of August were as follows: Raw materials Work in process Finished goods August 1 August 31 $24,000 Direct materials: 8,000 47,000 Saved $21,000 22,000 52,000 Manufacturing overhead: c. Only 75% of the rent on facilities applies to factory operations; the remainder applies to selling and administrative activities. The president has asked you to check over the income statement and make a recommendation about whether the company should look for a buyer for its assets. Raw materials available for use Raw materials used in production Required: 1. As one step in gathering data for a recommendation to the president, prepare a schedule of cost of goods manufactured for August. SWIFT COMPANY Schedule of Cost of Goods Manufactured For the Month Ended August 31 Help Save & Exit Submit
View V History -my.centennialcollege.ca 3 20 points Bookmarks. RPD 703 Mid-term Section 001 i 02:25:33 eBook Window DILMcGraw-Hill Connect - 22M --Mgmt. Acct. for.... Help Less cost of goods sold: ezto.mheducation.com Goods available for sale Less operating expenses: 2. As a second step, prepare a new income statement for August. Saved SWIFT COMPANY Income Statement For the Month Ended August 31 M Question 3- HRPD 703 Mid-term Section 001.... He
3. On the basis of your statements prepared in Requirements (1) and (2), would you recommend that the company look for a buyer? Yes O No