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 Furniture Manufacturers is owned and operated by twin siblings Joyce Yancy-Tate and Royce Yancey The company has been in operation for several years and manufactures 3-piece sets of outdoor furniture in a variety of colors and patterns

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 Furniture Manufacturers is owned and operated by twin siblings Joyce Yancy-Tate and Royce Yancey The company has been in operation for several years and manufactures 3-piece sets of outdoor furniture in a variety of colors and patterns. The company has been quite successful over the past years but has experienced a slow decline in profits for the past couple of quarters, according to reports generated by the administrative staff. A month ago, Joyce, took a leave of absence from the business to take care of her newborn twin Sons. Joyce is the Chief Financial Officer for the Company. An assistant business manager/accountant was hired temporarily to assist the staff in carrying out the accounting and financial duties, The company had been consistently reporting net profits over the years but a decline in profits over the past couple of quarters is quite noticeable. The Yancey twins are troubled by this performance and believe they need an expert to review the company's records and operations. Consequently, they have retained your consulting firm to perform research and evaluation and provide recommendations for improvement and recovery of profitable operations. There is also a need for an improved cash flow management strategy. Two distinct areas that you are investigating are manufacturing operations and cash flow management. Details are provided below for both areas.
PART ONE Manufacturing and Budgeting The newly hired business manager/accountant prepared the following income statement for the quarter ended June 30, 2020: 1 & R's Outdoor Furniture Manufacturers Income Statement For the Second Quarter Ended June 30, 2020 Sales Revenue (2,500 sets @ $900) $2,250,000 Operating Expenses Raw Material Purchases Advertising Indirect labor Direct Labor Selling and Adm. Salaries Utilities expense Rent-Factory Building Insurance expense Depreciation-Factory equipment Depreciation-Sales equipment $792,000 270,000 84,000 570,000 225,000 58,000 250,000 45,000 91,000 135,000 Total Sell/Admin Expenses 2,540,000 Net Income (Loss) ($270,000)
Royce is greatly disturbed by these reported results. The company had been reporting profit in prior quarters. Consequently, he and Joyce agreed to retain you as a consultant and have asked you to review the income statement and recommend any needed corrections and adjustments. You talked with the administrative staff and obtained the following additional data: A. Inventory Data April 1 June 30 Raw Material Work-in-Progress Finished Goods $48,000 72,000 90,000 $153,000 84,000 144,000 B. Fifty percent (50%) of the utility expense and sixty-six and two-thirds percent (66 2/3%) of the insurance expense are to be applied to the factory. The remaining amounts are to be considered selling and administrative expenses. REQUIRED Based on your assessment, the following schedule and financial statement are to be prepared and revised, respectively, in the proper format. 1. A detailed schedule of cost of good sold for the quarter ended June 30, 2020. 2. A corrected multi-step income statement for the quarter ended June 30, 2020. (See format in Exhibit #1)
EXHIBIT #1: Sales Cost of Goods Sold Gross Profit Selling and Administrative: Advertising Selling/Admin. Salaries Utility-Adm Insurance Depreciation-Admin. Total Sell/Admin Expenses " Net Income (Loss)