Accc505 Managerial Accounting: Alternate Case Study 1 (July 2012 Session) - Sandburg Inc

Accc505 Managerial Accounting
Alternate Case Study 1 (July 2012 Session)

Sandburg Co., Inc. began operations on January 1 of the current year. After five months of losses, management expects to earn a profit during June. However, Allan Johnson, the president and founder, was disappointed by the June income statement.
Sandburg Company
Income Statement
For the Month Ended June 30
Sales 445,000
Less: Operating Expenses:
Direct labor cost 65,000
Raw materials purchased 165,000
Manufacturing overhead 85,000
Selling and admin expenses 142,000 457,000
Net Operating Loss $(12,000)
Johnson was also concerned because the income statement was prepared by Stuart Smiley, a newly hired accounting assistant who had never worked for a manufacturing company before. His only experience was as an accounting clerk for a Las Vegas casino where reconciled poker chip accounts.
The former controller, Susan King, had resigned in May. Johnson recalled from his managerial accounting course, which he had taken over 20 years ago, that there was a way to calculate the cost of goods manufactured and the cost of goods sold based on cost data and inventory balances. He asked Stuart for inventory information, which looked liked this:
Inventory Balances
June 1 June 30
Raw Materials 9,000 14,000
Work in Process 16,000 21,000
Finished Goods 40,000 60,000

Johnson got out his managerial accounting textbook and stayed up all night trying to figure out whether Sandburg Co. was losing money or not. He isn't sure how to do it, so he asks you for the following:
1. Prepare a schedule of Cost of Goods Manufactured for June. Use the format in your textbook - Exhibit 3-11 (page 103).
2. Prepare a new income statement. Use the format in your textbook - Exhibit 3-12 (page 103).
3. Explain to Johnson why your income statement is different from Stuart's.
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