Ch 2_anum_rizvi - Ch 2 Homework 1.value:5 points Swift...

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1. value: 5 points Swift Company was organized on March 1 of the current year. After five months of start-up losses, management had expected to earn a profit during August. Management was disappointed, however, when the income statement for August also showed a loss. August's income statement follows: Swift Company Income Statement For the Month Ended August 31 Sales $600,000 Less operating expenses: Direct labor cost $91,000 Raw materials purchased 190,200 Manufacturing overhead 211,005 Selling and administrative expenses 140,595 632,800 Net operating loss $(32,800) After seeing the $32,800 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." 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. Inventory balances at the beginning and end of the month were as follows: August 1 August 31 Raw materials $18,000 $42,000 Work in process $69,000 $85,000
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This note was uploaded on 06/17/2010 for the course ACCT 2402 taught by Professor Eric during the Spring '10 term at Lon Morris College.

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Ch 2_anum_rizvi - Ch 2 Homework 1.value:5 points Swift...

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