Question

Cost of Goods Sold

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 49,100 units will be produced, with the following total costs:

Direct materials ?
Direct labor 53,000
Variable overhead 25,000
Fixed overhead 185,000

Next year, Pietro expects to purchase $128,000 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 $6,000 $14,000
Ending $5,900 $16,000

Pietro expects to produce 49,100 units and sell 48,400 units. Beginning inventory of finished goods is $47,500, and ending inventory of finished goods is expected to be $39,000.

Required:

1. Prepare a statement of cost of goods sold in good form.

Pietro Frozen Foods, Inc.
Statement of Cost of Goods Sold
For the Coming Year
$

$

$

2. What if the beginning inventory of finished goods decreased by $3,750? What would be the effect on the cost of goods sold?
  by $

Answer 1

Solution 1:

Pietro Frozen Food Inc.
Statement of Cost of goods sold
Particulars		Amount
Direct material consumed:
Beginning material inventory	$6,000.00
Add: Purchases	$128,000.00
Less: Ending material inventory	$5,900.00
Direct material consumed		$128,100.00
Direct labor		$53,000.00
Variable manufacturing overhead		$25,000.00
Fixed manufacturing overhead		$185,000.00
Manufacturing cost incurred during the period		$391,100.00
Add: Beginning Work in Process		$14,000.00
Less: Ending Work in Process		$16,000.00
Cost of goods manufactured		$389,100.00
Add: Beginning finished goods inventory		$47,500.00
Cost of goods available for sale		$436,600.00
Less: Ending finished goods inventory		$39,000.00
Cost of goods sold		$397,600.00

Solution 2:

If beginning finished goods inventory decrease by $3,750 then cost of goods sold also decreases by $3,750.

Revised cost of goods sold = $397,600 - $3,750 = $393,850