Question

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 50,000 units will be produced, with the following total costs:

Direct materials	?
Direct labor	$54,000
Variable overhead	29,000
Fixed overhead	205,000

Next year, Pietro expects to purchase $129,000 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	$5,000	$15,000
Ending	$4,900	$17,000

Required:

1. Prepare a statement of cost of goods manufactured.

Pietro Frozen Foods, Inc.
Statement of Cost of Goods Manufactured
For the Coming Year
Direct materials
Beginning inventory	$
Add: Purchases
Materials available	$
Less: Ending inventory
Direct materials used in production		$
Direct labor
Manufacturing (Factory) overhead
Total manufacturing costs added		$
Add: Beginning work in process
Less: Ending work in process
Cost of goods manufactured		$

2. What if the ending inventory of direct materials increased by $3,000? Indicate the affect that this would have on the items listed below: (decrease, increase, or no change)

	Direction of change			Amount
Direct materials used		by		$
Total manufacturing costs		by		$
Cost of goods manufactured		by		$

Answer 1

1
Pietro Frozen Foods, Inc.
Statement of Cost of Goods Manufactured
For the Coming Year
Direct materials
Beginning inventory	5000
Add: Purchases	129000
Materials available	134000
Less: Ending inventory	4900
Direct materials used in production		129100
Direct labor		54000
Manufacturing (Factory) overhead		234000	=205000+29000
Total manufacturing costs added		417100
Add: Beginning work in process		15000
Less: Ending work in process		17000
Cost of goods manufactured		415100
2
	Direction of change		Amount
Direct materials used	decrease	by	3000
Total manufacturing costs	decrease	by	3000
Cost of goods manufactured	decrease	by	3000