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:

From the given data we need to find question 1 and 2. These calculations are explained below,

Answer 1:

Pietro Frozen Foods, inc.

Statement of cost of goods sold for the coming year.

Particulars		Amount
Consumed direct materials:
Material inventory beginning	$6,000
Add: Purchases	$128,000
Less: Material ending inventory	($5,900)
Direct materials consumed		$128,100
Direct labour		$53,000
Fixed manufacturing overhead		$185,000
Variable manufacturing overhead		$25,000
Manufacturing cost incurred during the period		$391,100
Add: Work in process beginning		$14,000
Less: Work in process ending		($16,000)
Cost of goods manufactured		$389,100
Add: Finished goods inventory beginning		$47,500
Cost of goods available for sale		$436,600
Less: Finished goods inventory ending		(39,000)
Cost of goods sold		$397,600

Cost of goods sold = $397,600

Answer 2:

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

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

Revised cost of goods sold = $393,850