Question

Income Statement

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 47,700 units will be produced, with the following total costs:

Direct materials	?
Direct labor	58,000
Variable overhead	20,000
Fixed overhead	230,000

Next year, Pietro expects to purchase $122,000 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	$10,300
Ending	$3,900	$12,300

Next year, Pietro expects to produce 47,700 units and sell 47,000 units at a price of $15.00 each. Beginning inventory of finished goods is $47,500, and ending inventory of finished goods is expected to be $39,000. Total selling expense is projected at $29,000, and total administrative expense is projected at $110,500.

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
		$	%
			%
		$	%
Less operating expenses:
	$
			%
		$	%

2. What if the cost of goods sold percentage for the past few years was 57.93 percent? Management's reaction might be:

Answer 1

Note:
Schedule of Cost of Goods Manufactured:
Beginning Inventory of WIP					10300
Current cost f Manufacturing:
Beginning Inventory of RM			4000
Add: Purchases			122000
Total cost of material available for use			126000
Less: Ending inventory of RM			3900
Material Consumed				122100
Direct Labour				58000
Manufacturing OH-Variable				20000
Manufacturing OH-Fixed				230000
Total current cost of manufacturing					430100
Total cost of goods manufacturing					440400
Less: Ending inventory of WIP					12300
Cost of Goods manufactured					428,100
Schedule of Cost of Good ssold:
Beginning Inventory of FG				47,500
Add: Cost of Goods manufactured				428,100
Total cost of goods available for sale				475,600
Less: Ending inventory of FG				39000
Cost of Goods sold				436,600
Income Statement:			Amount	%
Sales revennue			705000	100.00%
Less:; Cost of goods sold			436600	61.93%
Gross Margin			268,400	38.07%
Less: Operating expense
Selling expenses			29000	4.11%
Admin expenses			110,500	15.67%
Net Icnome			128,900	18.28%
The management is concered for increasing cost of Cost of good sold.
It will try to find out the reasons and ways to control the increasing cost.