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BUSI 24 Assignment on Cost Terms and Classifications Delta Mountain Supplies has been in business for three months. The company was formed by two outdoor enthusiasts to produce high quality sleeping bags, which can used in all kinds of weather conditions. The owners of the company were well skilled in production and had developed an excellent relationship with a boutique store that specializes in selling outdoor equipment. The administration work and the accounting have been managed by the brother of one of the owner's. The brother had a business degree but no special training in accounting. The owners had just received the income statement for the latest quarter and were somewhat dismayed by the results. The company had almost reached its productive capacity for producing sleeping bags and most of them had been sold. Still, the income statement, presented in exhibit one, showed an operating loss for the quarter. Believing something was not correct, the owners have hired you to review the accounting information and to report back to them. Exhibit One Delta Mountain Supplies Income Statement For the Quarter ended, September 30 $720,000 Sales (5,000 sleeping bags) Operating expenses: Selling and administrative salaries Travel for sales purposes Advertising Indirect labour costs Raw materials purchased Plant supplies Direct labour cost Plant maintenance Depreciation, office equipment Rent (90% for the plant, 10% for sales space) Insurance (Plant only) Depreciation, Plant equipment Utilities (80% plant, 20% for sales operations) Total operating expenses Operating loss $63,000 45,000 98,000 100,000 220,000 5,000 75,000 38,000 13,000 50,000 6,000 65,000 32.000 810,000 $190.000) During the quarter, the company completed 7,000 sleeping bags. The owners completed a physical inventory count and valuation on September 30th. The opening and closing inventory values are as follows: July 1st Raw materials inventory Work-in-process inventory Finished goods inventory September 30th $30,000 $24,000 Required: 1. Describe two conceptual errors that the accountant" made in preparing the income statement shown in exhibit one