Question

Income Statement

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 49,500 units will be produced, with the following total costs:

Direct materials	?
Direct labor	61,000
Variable overhead	20,000
Fixed overhead	225,000

Next year, Pietro expects to purchase $115,000 of direct materials. Projected beginning and ending inventories for direct materials and work in process are as follows:

	Direct materials Inventory	Work-in-Process Inventory
Beginning	$4,000	$13,900
Ending	$3,900	$15,900

Next year, Pietro expects to produce 49,500 units and sell 48,800 units at a price of $17.00 each. Beginning inventory of finished goods is $45,500, and ending inventory of finished goods is expected to be $37,000. Total selling expense is projected at $27,000, and total administrative expense is projected at $120,500.

Required:

1. Prepare an income statement in good form. Round the percent to four decimal places before converting to a percentage. For example, .88349 would be rounded to .8835 and entered as 88.35.

Pietro Frozen Foods, Inc.
Income Statement
For the Coming Year
						Percent
Sales				$829600		100%
Cost of Goods Sold						%
Gross Margin				$		%
Less operating expenses:
Selling Expense		$ 27000
Administrative Expense		$120500		147500		%
Operating Income				$		%

Answer 1

Calculation of cost of goods sold
Beginning Inventory of Direct Material	4,000
Add: Purchases	115000
Less: Ending Inventory	3900
Direct Material Cost		115,100
Direct Labor		61000
Variable Overhead		20000
Fixed Overhead		225000
Total Manufacturing cost		421,100
Add: Beginning Inventory of work in process inventory		13900
Less: Ending Inventory		15900
Total cost of goods manufactured		419,100
Add: Beginning Inventory of finished goods		45500
Less: Ending Inventory		37000
Cost of goods sold		427,600
Income Statement
Sales	829,600	100.00%
Cost of goods sold	427,600	51.54%
Gross Margin	402,000	48.46%
Less: Operating expenses
Selling Expense	27,000	3.25%
Admin Expense	120,500	14.53%
Operating Income	254,500	30.68%